GH¢400m Minimum Capital Requirement: Merge To Avoid Collapse – Kwarteng

The deputy finance Minister Kwaku Kwarteng has urged local banks in Ghana to merge in order to meet the Bank of Ghana’s minimum capital requirement.

This, he said will avoid the banks from folding up thus, ensuring stability of the financial sector.

He said: “recently, we have seen Capital bank go down, we have seen UT bank go down, and we have seen the difficulties that Unibank has run into. [And] the point is that in all these but for the fact that government intervened, the money of depositors would have been lost.

“So the responsibility is on the Bank of Ghana to ensure that…financial intermediation is done by institutions and companies that have the capacities to do it without compromising the stability of the financial sector, without endangering the deposits of depositors, so that over all people will have confidence that if I put my money in the bank that money will there for me at all times.”

“It is to ensure this” he continued  “that the Bank of Ghana has found it necessary to put these requirements so that once companies and businesses are able to satisfy these requirements, you are fairly assured that the interest of depositors and the interest of Ghanaians are protected.”

Thus he stressed, “If the minimum capital requirement is raised the option for banks that are small is to merge.”

Mr. Kwarteng’s comments were in reaction to the Minority spokesperson on Economy Cassiel Ato Forson description of the hiking of the minimum capital requirement as needless.

The central bank last year raised the minimum capital requirement to GH¢400 million, equivalent to about US$100 million and commercial banks in the country have up to December 2018 to raise the amount, which represents a 333.3 per cent increase from the current minimum capital of GH¢120 million.

Banks were last recapitalized in 2012, when the BoG asked them to raise their stated capital from GH¢60 million at the time to the current GH¢120 million.

That round of recapitalization led to the consolidation of three banks, The Trust Bank (into Ecobank), Intercontinental Bank (into Access Bank) and Amalgamated Bank (into Bank of Africa).

“In the first place the call to introduce a minimum capital of GH¢400million is unnecessary, it is unreasonable and it is arbitrary,” the former deputy Finance Minister stated in an exclusive interview with Starr News’ parliamentary correspondent Ibrahim Alhasssan Tuesday at the sidelines of a press conference to react to a newspaper allegations that former government appointees took double salaries whilst in office.

Explaining why the recent increment in the minimum capital was rash, he told Alhassan that the erstwhile Mahama administration commissioned a research into a possible adjustment of the capital requirement and per the research the banks can only afford GH¢213million.

As a member of the Central Bank, the GH¢213million was approved he said “only for us to exit [and] this government comes in [and] based on somebody’s thinking that the banks should come together without any scientific analysis and concluded  that minimum capital requirement should be increased to four hundred million Ghana cedis…approximately three hundred percent increase.”

“That does not make sense…because it was not backed by any scientific analysis,” he stated warning that the move will lead to ceding Ghana’s universal bank structure to foreigners which would be detrimental to the economy of the country as the foreign banks “are not interested in the SMEs and in funding government business.”

 

Source: Starrfmonline