Banks declare readiness for new minumum capital
After a long wait for an announcement on the new minimum capital requirement, banks say they and their shareholders are now more-than prepared for a definite pronouncement on the new capital.
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The announcement, which is due in the first week of September, will bring to an end two years of speculations on how much banks would be recapitalised to and how long it will take them to raise that capital.
It will also set the stage for “some conversations” to begin within and among shareholders towards meeting the prospective directive, the President of the Ghana Association of Bankers (GAB), Mr Alhassan Andani, told the GRAPHIC BUSINESS on August 11.
“I think the announcement of the minimum capital has probably taken two years in coming,” he said, moments after the Finance Minister, Mr Ken Ofori-Atta, hinted that the Bank of Ghana (BoG) and the ministry would be announcing the modalities for the next round of recapitalisation in two-to-three weeks’ time.
Attractive market
Although the minister declined to give details, he said: “It is likely that the new capital requirement will be quite substantial,” forcing the question, how much is substantial?
While the industry is eager for the announcement, the GAB’s president said bankers now “are prepared” after they were given heads-up on a pending recapitalisation, almost two years ago.
“We were given the heads up, we have prepared, we have played around with some numbers and now he (the Finance Minister) says it will be announced in two to three weeks’ time, but he still fell-short of telling us the exact number.
“So, as for preparedness, we have been informed and we are prepared and I am sure our various boards and shareholders have been informed,” Mr Andani, who is the Managing Director of Stanbic Bank, said.
While, as employees, the various managing directors might not be able to tell how their respective shareholders intend to recapitalise the banks, he said the attractiveness of the banking sector meant that shareholders could reach out to each other in a bid to meet the requirement.
Plausible time frame
On what time frame was reasonable for banks to raise additional capital, Mr Andani said the association could not be definitive on that, given that the rest of the details had not been revealed.
He explained that unlike indigenous banks, foreign-owned banks would have to convince their shareholders that the broader macro and political environment in the short to medium term warrants the raising of that amount of capital.
“It is not that easy,” he said in reference to earlier concerns that foreign-owned banks would not have a challenge meeting any amount of capital irrespective of the time frame.
“You have to take the broader macro and sociopolitical environment and synthesise and project into the future and convince whoever is the shareholder that yes, the capital that is required will be secured into the future and that is not as easy as we say,” he said.
For the local banks, however, he said: “Even if they are happy with the current macro and political environment, they still need to gather the money.”
He thus described as comforting the assurance by the Finance Minister that local banks would be allowed enough time to meet the new recapitalisation requirement.
Mergers and acquisitions
Discussions on the need for bank consolidations have been ongoing for some time now, although not many successes have been achieved.
With a population of about 27 million people and an annual gross domestic product (GDP) of close to $40 billion, Ghana’s economy is understandably small for the current 36 banks.
The situation even becomes more interesting when Ghana is weighed against Nigeria and South Africa, whose economies are estimated to be worth US$550 billion and US$400 billion, respectively.
Unlike here, 25 and 20 banks serve some 56 million and 190 million people in Nigeria and South Africa, respectively, making Ghana’s bank numbers a curious spectacle for many.
One of those people is Mr Ofori-Atta, who intimated at the GAB that the high numbers had given room to “certain externalities and behaviour that are occurring because of some form of competition.”
He was thus hopeful that a review of bank capital requirements together with other measures would help strengthen the banking sector give rise to mergers and consolidation and set the stage for Accra to become a financial services centre in sub-Saharan Africa.
“I think it has to be a run for the races to see how the new capital requirements will be fulfilled by you and we finding incentives to encourage you to try and come together,” he said.
While mergers and acquisitions are good, a Banking Consultant, Nana Otuo Acheampong, said it would be wrong to force banks to consolidate.
