Ghana Triples Minimum Capital Requirements for BanksBy
Central bank said to raise minimum level to 400 million cedis
Regulators want lenders to strengthen balance sheets
The Bank of Ghana more than trebled minimum capital requirements for lenders as part of reforms to strengthen the industry, according to people familiar with the matter.
Lenders will need to set aside at least 400 million cedis ($91 million) in capital compared with 120 million cedis previously to meet their license obligations, the people said, asking not to be identified because an official announcement hasn’t yet been made. Lenders will be given until December 2018 to meet the requirement, they said.
The GSE Composite Index fell 2.8 percent on Friday, the most since records began in 2011, to pare a 41 percent rally this year that drove the gauge to a record-high only two days earlier. Standard Chartered Bank Ghana Ltd. dropped 9.8 percent and Ghana Commercial Bank Ltd. slid 10 percent, with both securities starting their decline earlier in the day.
Regulators had delayed the introduction of the new rules to allow nine of its more than 30 lenders time to bolster their capital levels. The deposits and some assets of two of those banks, UT Bank Ltd. and Capital Bank Ltd., were taken over by Ghana Commercial Bank Ltd. last month after they failed to meet the requirements. The rest either met or presented plans to attain the target, Governor Ernest Addison said on Aug. 14.
The requirements are “a little higher than we were expecting,” said Benjamin Amoah-Adjei, an analyst at Firstbanc Brokerage Services Ltd. who thought the central bank would settle at between 320 million and 360 million cedis. “It shouldn’t be a problem for most banks. Those with foreign owners will turn to their parent companies for a capital injection, while local banks will find ways of raising capital.”
Most banks have had to submit capital plans to the regulator so would be prepared for the new regulations, Amoah-Adjei said, adding that Friday’s drop on the stock exchange could be attributed to investors cashing in profits from the rally.
“The best way to raise capital is probably to list,” he said.
Banks are being forced to strengthen their balance sheets as the country tightens regulations. Policy makers have said that capital levels in the industry are too weak to support the government’s plans to boost lending and reignite an economy that expanded at the slowest pace in 26 years in 2016. The central bank expects that increasing capital requirements will spur mergers and acquisitions in the industry that will result in few, stronger lenders.
The phone of Bernard Otabil, a Bank of Ghana spokesman, was switched off when contacted for comment. Second Deputy Governor Johnson Asiama and Alhassan Andani, president of the Ghana Association of Bankers, didn’t answer calls seeking comment. Spokesmen for the Ghana Commercial Bank and the local unit of Ecobank Transnational Inc., two of the country’s largest lenders by value, didn’t answer calls seeking comment.