Managing Director of UBA Ghana, Abiola Bawuah, has endorsed the BoG Governor’s position that banks that cannot meet the GH¢400million minimum capital requirement should downgrade to savings and loans companies.
“Nobody is preventing a bank from doing small ticket but if you want to do micro, you go to savings and loans. Beyond savings and loans too, we also have microfinance. But currently, our [banks] sizes are too small for a country like Ghana,” she said.
She described the minimum capital increment as being “perfect”, saying the balance sheets of banks are too small, and that the increment should bring banks together so they can do bigger deals and for the industry to be properly sanitised.
The minimum paid-up capital of the banking sector increased to GH¢4.1billion in February 2017 from GH¢3.2billion in February 2016, following injection of additional and new capital by both existing and newly licensed banks.
“I believe that currently a lot of banks have very small sizes and so they can’t-do big-ticket transactions. If you come today and say you want a bank that can do GH¢100million, which is just US$25milllion, you won’t get it,” she said.
To her, the economy has got to a stage where bigger banks are needed to support growth in all spheres, including infrastructural development, aggressive industrialisation and the exploitation of oil and gas resources.
The central bank Governor, Dr. Ernest Addison, at the Monetary Policy Committee meeting this week, said: “We want banks that will have the capacity to be able to help transform this economy, and having a bank that can mobilise adequate resources and finance big-ticket transactions is crucial in being able to deliver that transformation, and this is why we are emphasizing the strength of the capital of the banks.
He bluntly told the banks that: “if you think that you are operating in a niche that does not require that you should have a GH¢400 million level of capitalisation, you can choose to go for a savings and loans licence.”
An analysis conducted by Emmanuel Akrong, a credit consultant, shows that only three banks out of the 34 banks currently operating in the country are in a position to meet the new GH¢400 million minimum capital requirement set by the Central Bank of Ghana (BoG) without recourse to additional capital.
The list has 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.”
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.
Government appears keen on bringing about consolidation in the banking sector; aside from the BoG Governor, the Finance Minister, Ken Ofori-Atta, has equally said the number of local banks need be deliberately whittled down to about five, to put them in a position to support government’s development agenda.