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Business News of Tuesday, 31 July 2018

Source: Myjoyonline.com

Better to own 50% of something than 50% of nothing – Senior Minister to struggling banks

Banks that are struggling to raise the Bank of Ghana’s GHS400 million capital requirement do not have to collapse, Senior Minister, Osafo Maafo has said.

According to him, the financial institutions that cannot meet the requirement can prevent dissolution by merging with other banks to form single banks.

Mr Maafo believes that merging with other banks is a wiser business decision to make which will enable those banks to still make some earnings, rather than remaining on their own and making nothing in the end due to closure.

“It is better to own 50 percent of a thousand than to own 50 percent of nothing. We have a traditional problem of people wanting to own 100 percent of something themselves,” the Senior Minister said Tuesday, at the Graphic Business/Stanbic Breakfast Meeting in Accra.

Last year, the Central Bank raised the minimum capital requirement to GHS400 million and commercial banks in the country have up to December 2018 to raise the amount.

The new requirement represents a 333.3 percent increase from the current minimum capital of GHS120 million.

Banks were last recapitalised in 2012, when the BoG asked them to raise their stated capital from GH¢60 million at the time to the current GH¢120 million.

That round of recapitalisation led to the consolidation of three banks, The Trust Bank (into Ecobank), Intercontinental Bank (into Access Bank) and Amalgamated Bank (into Bank of Africa).

The current requirement has already seen some mergers. GN Bank, Premium Bank and Sahel Sahara bank have in the past weeks concluded a merger.

Analysts expect more of these mergers in the coming months.

Mr Osafo Maafo is happy with the mergers.

Describing it as “good news”, he indicated that, that was the best move for the banks to make.

“Sometimes it is better to own a fraction of something that is very viable…because if your company is making a profit of 10 million and you own 10 percent, you at least get one million.

“So it is better to talk about viability rather than being alone. We should all learn to join hands when it becomes necessary,” he added.

He is confident that the measures the BoG is putting in place to sanitise the banking sector will yield fruitful results.