Banks require GH¢1bn stated capital – Experts

Group CEO of CDH Financial Holdings, Emmanuel Adu-Sarkodee, has joined calls for a significant increase in the stated minimum capital for banks to about GH¢1billion, in order to support aggressive economic growth.

Kenneth Thompson, Managing Director of Dalex Finance, has been making a similar argument, saying for banks in the country to adequately support infrastructure growth and act as the real enablers of growth, they would have to have at least GH¢1billion as stated capital.

Currently pegged at GH¢120million, the amount of capital commercial banks have to hold has dropped in value as compared to the US dollar, from around US$60million in 2012 to under US$30million presently.

“If you do not have a minimum capital of US$150million (GH¢700million) at all times do not even bother to think of having a bank. If you cannot raise the amount within 24 months, merge with another to form a bigger institution,” Mr Adu-Sarkodee said in an interview with the B&FT.

Ghana cannot improve its agriculture, infrastructure, including roads, railways and others, with the relatively small-sized banks it has, the boss of a group of financial institutions said.

“We want to expand education and health infrastructure, including more schools and hospitals, but we are not going to borrow money from other institutions to do it, the banks have to fund it.

But if we have small banks in the country where minimum capital requirement is GH¢120million, which means single obligor limit is GH¢30million, what can that do? It cannot even build a brand new hotel in Kumasi,” he said.

The central bank has long said it is going to raise the minimum capital requirement from the current GH¢120million set in 2012, to a figure, and on a date, it is yet to disclose.

Whilst opinions differ on how much is good enough as stated minimum capital for banks, both the central banks and industry players are agreed on the inadequacy of the current figure.

According to Kenneth Thompson of Dalex Finance, for banks to be able to finance, say, US$50million projects, and for future depreciation of the cedi to be accounted for, GH¢1billion would be required as minimum capital.

Some stakeholders have offered syndication as a way out of the inability of Ghana’s banks to single-handedly take on big ticket transactions.

Mr. Adu-Sarkodee argues, on the contrary, that infrastructural development and economic growth cannot be always funded by syndicated financing.

“Everything has to be syndicated and the cost of syndication is expensive and time consuming but if you have a big bank you can do the big tickets,” he said.

He believes that the Bank of Ghana has all the capacity and power, in its role as the regulator, to force mergers in the market to come up with big banks that can finance big projects.

“It depends on the policy the BoG wants to pursue. Sanusi Lamido Sanusi [former Governor of Nigeria’s Central Bank] forced mergers and acquisitions but our central bank is encouraging it and as we keep encouraging and introducing some laws to back it, we will get there,” he said.

“You can tell that this bank is strong in this sector and this one is strong in the other sector, and they can fit. But the problem is coming from the shareholders and directors. The typical Ghanaian would rather want to sail a ship alone than partner someone. I think the Bank of Ghana would have to organise a programme for all these institutions to drum it into our heads that nothing will happen if we merge,” he added.