Banks Minimum requirement to hit $50 million

Mergers and Acquisitions in the banking sector is set to be heightened with the Bank of Ghana indicating that it is proposing a review of minimum capital requirements of banks and non-bank financial institutions.

A statement by the Central Bank says minimum paid up capital of banks is to increase from GH¢7.0 million to between GH¢50-60 million (equivalent of around $50m); and that of deposit taking non bank financial institutions (NBFIs) and finance houses would increase and from GH¢1.0 million (and GH¢1.5 million) to between GH¢5-8 million. The phenomenon could cause smaller banks to either go out of business or merge with big banks to survive in the industry.

The mechanism, set to take place by the middle of next year, requires Banks and deposit taking non bank financial institutions to submit capitalization plans by the end of June 2008. Submission of capitalization plans would guarantee continued access to the settlement and primary dealership systems. After December 2008, participation in the settlement system will be restricted to institutions that have met the capital requirements.

To ensure an orderly consolidation, BOG says the banking system would allow for lower tier banks after December 2008 so that banks that do not meet the capital requirements will belong to the lower tier. Banks and NBFIs granted licenses or provisional licenses within the last six months to date will be required to meet the new capital requirements within two years from the date of operations.