The Bank of Ghana’s decision to peg the new minimum capital requirement for commercial banks at an estimated 260 million cedis should culminate in mergers and deepen the financial sector.
This is the position of the Managing Director of Zenith Bank, Henry Oroh.
He explains to Citi Business News banks should also be able to undertake huge capital transactions with the increase in minimum capital.
“The regulator has put forward about 260 million cedis. I think the minimum capital resetting was done deliberately by the government and the central bank to create bigger banks in the economy. We have a lot of banks that have very little capital and when your capital is very little, there is very little that you can do and when there are shocks, you’ll have some problems,” Mr. Oroh told Citi Business News.
Already, some Managing Directors of banks are upbeat about the increase in the minimum capital requirement.
Currently, banks are operating with a minimum capital requirement of 120 million cedis.
Some industry watchers believe the current figure has partly contributed to the over thirty-three (33) banks despite Ghana’s relatively small population size.
Mr. Oroh is however optimistic that bigger banks would also boost economic growth.
“Raising the capital up by the central bank is to compel banks to come together in a way to achieve bigger banks…When you look at the size of Ghana’s economy with over thirty-three banks, we are over banked if you ask me, compared to bigger economies like Nigeria and South Africa which have much less number of banks.”
Banks submit documents for assessment
The Governor of the Bank of Ghana, Dr. Ernest Addison, last week told the Head of Business Desk at Citi FM, Vivian Kai Lokko in Washington that banks have submitted their reports for assessment.
According to him, the reports should help in determining the minimum capital requirement for the banks.
“The Bank of Ghana has written to them to submit recapitalization plans. We are waiting to look at those recapitalization plans. It has to be credible. We are hoping that in the next few weeks on the basis of their report that they submit, some decisions would have to be taken,” he hinted.
Banking Consultant urges economic capital requirement
In light of discussions in reviewing the minimum capital requirement of banks, Banking Consultant, Nana Otuo Acheampong has impressed on the Bank of Ghana to consider an economic capital requirement for universal commercial banks in Ghana rather than the regulatory minimum capital requirement.
The economic capital requirement, according to Nana Otuo Acheampong, will allow the banks the choice to either remain a small bank or grow to become a bigger bank which allows them opportunity to participate in multimillion dollar transactions.
Capital market to grow with new minimum capital requirement
Meanwhile some analysts are anticipating growth in the capital market as banks which would opt out of mergers would be compelled to resort to the market to meet the revised regulatory capital requirement.
By: Pius Amihere Eduku/citibusinessnews.com/Ghana