New minimum capital for Banks to be announced in Sept.

From all indications and inside information from the Bank of Ghana (BoG), it is likely the Central bank will announce a new minimum capital requirement for banks by September this year.

The central bank have said, it is almost through with the required engagement with all the players in the industry to possibly aid the announcement.

It indicated earlier that, it would announce the new capital levels as soon as it completes work on some nine banks said to be in financial distress.

Director of Banking Supervision, Raymond Amanfo, at the launch of the 2017 Ghana Banking Survey Report, PriceWaterhouseCoopers said the capital review would be done in a way that would ensure that it is relevant for all the commercial banks.

“We are looking at a capital level that would not result in an overcapitalization or something that would be injurious or irrelevant for any bank,” he added.

Although, it is unclear for now how much the minimum capaital would be, some industry players have predicted it could be increased to ¢250 million, ¢300 million or even ¢500 million.

BoG had in the past struggled to enforce the capital requirement. It is clear that not all the over 30 banks would be able to meet the new capital levels.

But the regulator is insisting that it would ensure that every bank shows a plan to meet the new levels when the announcement is made.

In 2003, the regulator issued a directive to commercial banks to increase their capital to a minimum of ¢7 million as part of measures to strengthen their capital base.

In 2008, it increased the capital to ¢60 million in a bid to make the banks more resilient against unforeseen or expected losses.

The BoG later proposed ¢120 million for new entrants and later asked the existing banks to increase their capital to that level.

In February 2017, the Bank of Ghana gave some indications that it wants to raise the levels again.

According to the accounting firm, PriceWaterhouseCoopers, in real terms, the minimum capital of ¢60 million has significantly eroded as the cedi to dollar parity has declined from less than 1 to almost 4.5 times, hence the need for this review.

The Central Bank would also start with the implementation of Basel II for commercial banks in the country from next year.

This has been described as a new regulatory requirement for banks based on their risk.

The Basel II is an international business standard that requires financial institutions to maintain enough cash reserves to cover risks incurred by operations.

The Basel accords are a series of recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision.

According to Mr Amanfo it is from next month that it would start sharing with the banks the various standards for measuring risk in the banking sector ahead of the implementation of Basel II.

Source: Adnan Adams Mohammed

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