Only three banks out of the 34 banks currently operating in the country are in a position to meet the new GHC400 million minimum capital requirement set by the Central Bank of Ghana (BoG) without recourse to additional capital, credit consultant, Emmanuel Akrong has said.

The list has only GCB Bank, which recently absorbed indigenous banks Capital and UT banks, as the only local bank.

The rest include Zenith Bank and Barclays Bank, which Mr. Akrong said “are the only banks that might not require additional capital to meet the minimum capital requirements for 2018.”

The central bank on Friday announced that banks in the country have until December 2018, to meet the new minimum capital requirement, with those unable to meet the deadline facing possible repercussions which include the loss of their banking license.

The new minimum capital requirement is a 233 percent increment over the old GHC120 million benchmark, which had some banks struggling to meet.

Mr. Akrong in his publication titled: “Analysis of Proposed New Minimum Capital for Banks in Ghana,” the conclusion was arrived at having assessed the banks’ current ability to comply with the new capital requirements under the hypothesis that banks would consider capitalising their income surplus as reported at December 31, 2018.

“On the basis of the information disclosed in the June 30, 2017 and December 31, 2016 financial statements of banks, we determined that GCB, Barclays Bank of Ghana Ltd. and Zenith Bank Ghana Ltd are the only banks that might not require additional capital to meet the minimum capital requirements for 2018,” he said.

Meeting the capital requirement

Some of the possible means available for the undercapitalized banks to meet the BoG’s requirement include listing on the stock market to raise capital or merging with other banks to create a much stronger entity.

A seen by the recent purchase and assumption transaction done between GCB and Capital and UT Bank on the other hand, a lot of smaller banks will be keen on exploring such acquisitions as a way of remaining in business and not risk their licenses being revoked.

Following the demise of the local two banks, the central bank has maintained that it will not hesitate to treat other banks facing similar fortunes in the same familiar fashion.

The utterances by central bank governor, Dr. Ernest Addison, is supported by the Finance Minister, Ken Ofori-Atta, who said there is the need to deliberately whittle down the number of local banks in the country to about five stronger ones that will be in a better position to support government’s agenda

Risking it all

Any bank unable to increase its capital up to GH¢400 million by December 31, 2018 will be considered as an undercapitalised Bank.

Explaining the process which will see an undercapitalized bank lose its license, Mr. Akrong said the distressed as a first remedy will be required by the central bank to submit a capital restoration plan within 45 days after BoG requesting.

The central bank will then have 180 days after receiving the said plan to conclude the capital and liquidity restoration process just as stated by the Banks and Specialised Deposit–Taking Institutions Act, 2016 (Act 930).

Subsequently, the BoG will further impose restriction on growth of assets or liabilities, in other words the Bank may not be able to lend or accept deposit from the public.

If the problem persists after the first attempt, BoG, he said, will provide a 90-day window for a new plan and a further 180 days to correct the anomaly.

Banks that fail the first two attempts are required by Act 930, the law that regulates the banking industry, to be put into official administration.

“Lastly, section 123 of Act 930 provides BoG the right to revoke the license of the Bank when BoG believe the Bank will be insolvent within 60 days,” he said.