Ghana’s Central Banks gives banks 1-year to meet new capital requirement

The central bank has given commercial banks in the country up to the end of next year – December 2018, to meet the new minimum capital requirement.

According to sources, the central bank has announced that in accordance with section 28 (1) of the Banks and Specialized Deposit Taking Institutions Act 2016 Act (930) it has revised upwards the minimum paid up capital for existing banks and new entrants to 400 million cedis from the 120 million cedis.

– Capitalization rules –

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

According to the Bank of Ghana (BoG) 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.

A statement from the central bank said ‘all pending applications for baking 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.

– New figure too high –

There are however fears most of the local banks will not be able to meet the new requirement.

Some local banks have also asserted the figure is on the high side.

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

‘It’s 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’.
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