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Business News of Tuesday, 21 August 2018

Source: citinewsroom.com

Compliance level for banks’ recapitalisation risky – Economist

Economist, Dr. Lord Mensah has described as quite disappointing, the number of banks that are yet to meet the minimum capital requirement.

According to him, the development shows how most of the banks are struggling to meet the deadline by end of year [2018].

“It is quite disappointing because banking operations is basically sourcing for funds and uses of funds,” Dr. Mensah said.

“So if it turns out that by the regulator raising the bar you are not able to raise money to that level in a form of equity, then it gives the signal that our banks are quite weak in terms of how they raise money in our economy,” he added.

Citi Business News‘analysis has shown that at least 16 banks are yet to announce their position on meeting the 400 million cedis minimum capital requirement; with four months to the deadline.

Six banks have already met the target with seven others undertaking various measures to recapitalize.

But Dr. Lord Mensah maintains that the fact that most banks may not have declared their position on attaining the requirement, spells doom for the banking industry as it is quite risky.

“So basically, their involvement in the banking space is very minimal which is for me quite risky. That is why possibly the regulator see it to be more or less an exposure and keep on shifting the goalpost in terms of capital requirement”.

Dr. Mensah however tells Citi Business News it is likely most banks will merge to be able to meet the requirement set by the Central Bank.

Commercial banks have till the end of December to recapitalise.

A bank’s inability to meet the requirement will mean it could lose its license or get its status reduced to a Savings and Loans company.

Already, seven banks have had their licenses revoked over several infractions.

The latest crackdown which affected five banks led to the creation of the Consolidated bank.