Banks Decide New Minimum Capital

The Central Bank Governor has urged commercial banks to build their capacity to embark on major projects with sound capital base to absorb shocks.

This follows the current establishment of a technical committee at the Central Bank to review and recommend an appropriate level of minimum regulatory capital for banks and the modalities for meeting same.

Dr Abdul Nasir Issahaku, who was addressing the Annual General Meeting of the Ghana Association of Bankers (GAB) on Thursday in Accra, said “the Bank of Ghana (BoG) is of the conviction that the time to inject more capital is now and this is to enable banks become strong and resilient and position them to tale on big ticket deals locally and internationally.”

He said the asset quality review undertaken on loans and investment portfolio of banks in Ghana by some accounting firms on behalf of the Bank of Ghana in the first half of this year highlights the need for injection of additional capital by banks.

“It should be possible for banks in Ghana to grant loans to finance projects abroad in competition with other global players. Moreover, competition in the industry is driving banks to open up their branch network which requires large deployment of resources.”

The Bank of Ghana, in March 2003, raised the capital levels of banks to GH¢7.0 million.

In 2008, the requirement was revised upwards to GH¢60 million to be met by end December 2009.

The requirement was again revised to GH¢120 million for new industry entrants in 2013 mainly due to the depreciation of the cedi and the vulnerabilities that had built up in the banking system.

This was to help banks reflect the provisions of the ICAAP principles of Pillar II under the Basel framework.

Deposit protection bill

Passed by Parliament in July, this year and awaiting presidential assent, Dr Issahaku said it is targeted at protecting small savers from loss incurred as a result of the occurrence of an insured event, probably the revocation of the licence of a deposit-taking institution.

“The initial and other logistics for the Deposit Protection Corporation are to be provided by the Bank of Ghana and government while eligible banks and specialized deposit taking institutions (SDIs) contribute initial and annual premiums into an insurance fund. Ghana’s deposit protection scheme will initially function as a pay box with the amount of compensation to be paid to bank customers in the event of failure limited to GH¢6,250 per customers and GH¢1,250 for customers of specialized deposit taking institutions.”

The scheme, expected to be eventually transformed into a fully-fledged deposit insurance scheme with a broader mandate to engage in risk-minimization and other roles, will have an initial capital of 26 million Euros.