Banks given 1 year to meet new capital requirement

The Bank of Ghana (BoG) has given commercial banks in the country up to December 2018, to meet the new minimum requirement.

The minimum capital requirement is the amount a bank must hold in order to operate.

The new rate is an increase of 233.3 percent from the previous 27 million dollars.

The new rate took effect on the 11th of September, 2017.

The BoG explained that commercial banks are required to meet the new capital through fresh capital injection, capitalization of income surplus or a combination of the two.

The banks will not be allowed to capitalize revaluation reserves, reserves on financial instruments through other comprehensive income, statutory reserves, credit risk reserve and unaudited profit.

The new rate will not only affect existing banks but new entrants.

“All pending applications for banking license without ”approval in Principle” are required to meet the new minimum capital requirement of 400 million cedis and the feasibility reports accompanying such applications should be amended,” a statement from the BoG said.

However, there are concerns that the new capital requirement is too high. Some have argued that this may cause some banks especially the indigenous ones to merge or sell-out completely.

But Banking consultant Nana Otuo Acheampong believes the figure is just right.

He told Accra-based Citi FM that “It is just right because that’s the regulatory capital which is set by the regulator having regard to the risk aspect of the banking sector. So they would have done all the calculations, looked at the size of the economy between the last time there was an increase back in 2002 and 2017, how big the economy has expanded. In 2002 we didn’t have oil. Now we have oil, so all those factors play a role in coming up with a figure and so having had regards to all those factors, the regulator has set the four hundred million cedis and therefore it’s difficult if not impossible to challenge them because they have access to the records.”