19 Banks meet new capital requirement

BY: Kester Aburam Korankye & Emmanuel Bruce
Dr Ernest Addison — Governor, BoG
Dr Ernest Addison — Governor, BoG

With three months left to the deadline for banks to recapitalise to GH₵400 million, 19 out of the 30 universal banks in the country have fully met the requirement.

 The Governor of the Bank of Ghana, Dr Ernest Addison, who announced this in Accra yesterday, however, refused to disclose the names of the banks.

“The last time we were here, I told you that 15 banks were ready to recapitalise. But today I can stick my neck out for 19 banks,” he said.

However, sources within the central bank hinted the Graphic Business in confidence that the remaining local banks were still struggling to meet the minimum capital requirement because most of them had not yet submitted plans on how they could recapitalise.


The sources, however, mentioned that some of them might be silent because they had begun merger talks with one another in their quest to meet the deadline.

Reassurance

Addressing the media after the 84th Monetary Policy Committee (MPC) meeting of the central bank in Accra, he further assured the public that banks in the country were strong and well capitalised.

“The banking sector continues to be profitable, sound and well capitalised,” the governor said.

Sharing some statistics to buttress his point about how strong the sector was, he said total assets of the banks rose to GH¢44.2 billion by the end of July 2018, representing an increase of 39.7 per cent, with advances constituting 45.8 per cent.

He said the industry’s capital adequacy of 19.1 per cent was also significantly above the prudential requirement of 10 per cent.

Dr Addison added that the banks also reduced their operating expenses in response to a decline in both interest and non-interest income.

Non-performing loans

The governor also pointed out that the quality of loans in the sector had improved. For instance the industry’s non-performing loan (NPL) ratio eased to 21.3 per cent in August 2018, from 21.9 per cent in the corresponding period in 2017.

In spite of that, he said, the central bank had also approved a loan write-off of GH¢1.2 billion for the industry, which should further reduce the NPL ratio significantly to 18.4 per cent.

Private sector credit

Dr Addison also noted that private sector credit growth continued to recover, although at a moderate pace, as ongoing balance sheet restructuring by the banks continued.

He said private sector credit in August 2018 grew by 15.8 per cent year-on-year, compared with 6.5 per cent a year earlier.

In real terms, he said, private sector credit expanded by 5.4 per cent in August, against a contraction of five per cent over the same period last year.

“The latest credit conditions survey shows a tightening of banks’ credit stance on loans to both households and enterprises, as banks continue to repair their balance sheet and also build their capital base,” he stated.

Stay of policy rate

Against anticipation for a marginal increase in the policy rate, which is the rate at which the central bank lends to the universal banks, the BoG maintained the rate at 17 per cent.

Dr Addison explained that the BoG kept the policy rate unchanged because of significant threats to the inflation outlook of the economy due to a number of external factors.

He said the threats had been fuelled by trade wars among developed economies which had effects on the growth of Emerging Markets and Developing Economies (EMDEs).

“Growth in Emerging Markets and Developing Economies (EMDEs) is stable but there are lingering concerns for EMDEs about tighter financing conditions and rising global protectionism, and as a result EMDEs have witnessed capital flow reversals, as investors become more focused on country-specific vulnerabilities.

He also said the strengthening of the US dollar in the international markets had exerted pressure on currencies in EMDEs, including Ghana.

In a related development, a banking consultant, Nana Otuo Acheampong, and an economic analyst at Data Bank Financial Services, Mr Courage Boti, in an interview after the MPC meeting, agreed with the BoG for keeping the policy rate unchanged, saying they did not expect any change due to external threats to the inflation outlook of the economy.

“They stayed the policy rate because presently they are within the inflation target so anything that will shift them from the target won’t be encouraged.

Although there has been an increase in petroleum prices, its effect is neutral because Ghana is now an exporter of petroleum products and so the effect of the price changes which we would have felt when we were just importers won’t be the same now that we are exporting,” Nana Acheampong said.

Mr Courage Boti also said: “We have seen the interest rate on a trajectory that is getting worse and this may have warranted the stay of the policy rate.” — GB