BoG warns 'weak' banks to recapitalise or convert to Savings and Loans

BoG warns 'weak' banks to recapitalise or convert to Savings and Loans

The Bank of Ghana (BoG) has cautioned commercial banks with weak financial grounding to to recapitalise or consider converting into Savings and Loans companies.

The Central Bank recently increased the minimum capital requirements for all commercial banks to ¢400 million - a figure that represents over twice the previous amount.

BoG warns 'weak' banks to recapitalise or convert to Savings and Loans

Governor of Bank of Ghana, Dr. Ernest Kwamina Yedu Addison

As a result, some banks in the country currently stand to collapse if they are unable the raise the stipulated capital requirement, while others could also only survive through merging.

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However, the Governor of the BoG,  Dr. Ernest Addison says despite the colossal amount being forced down the throat of banks, the move will help to strengthen the state of banks in the country.

He said the minimum capital of ¢400 million had become necessary due to developments in the economy.

Reacting to questions over whether  the minimum capital should be based on categorisation, Dr. Addison said the BoG's move is geared towards transforming banks in order to strengthen their capitals.

According to him, banks will only be able to deliver this transformation if they can "mobilize adequate resources and finance big-ticket transactions".

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This, he said, "is crucial" and that is why the BoG is emphasising so much on "the strength of the capital of the banks”. 

He warned that banks that feel they can't comply with the new directive should consider acquiring a "savings and loans license".

"So yes, if you think that you are operating in a 'niche market' that does not require that you should have a ¢400 million level of capitalization you can choose to go for a savings and loan license,” Dr Addison remarked.

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Banks in the country have until the BoG's December 2018 deadline to meet the new capital levels of ¢400 million.


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