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Wed, Aug

Banks’ new minimum capital to reflect their risk exposure

Mr Wyczynsky Ashiagbor (middle) interacting with Mr Alhassan Andani (left), Managing Director of Stanbic Bank

The Bank of Ghana (BoG) is to roll out in phases, a new banking regulation model that will require banks to keep minimum capital commensurate with the risks they face, the Governor, Dr Ernest Addison, has announced.

He stressed that the capital structure of banks was bound to shift to a new framework that would focus on quantity and quality of capital.

“Banks will be expected to inject additional capital of high quality capable of absorbing unexpected losses in line with requirements of the Basel III framework, as well as the Banks and SDIs Act (Act 930),” the governor said in Accra last Wednesday.

The first phase to begin with engagements with stakeholders before the end of the year would comprise the rolling out of capital requirements which would allow banks to calculate capital charges for credit, market and operational risks, he said.

The framework would also affect other specialised deposit-taking financial institutions.

2017 Banking Survey

Dr Addison was speaking at the launch of the 2017 Ghana Banking Survey, an annual industry analysis carried out by  an accounting and advisory firm, PricewaterhouseCoopers (PwC), in collaboration with the Ghana Association of Bankers.

The risk-based regulatory framework requires that a bank keeps levels and layers of capital commensurate with the risks it is exposed to.

This is quite different from the current regime where banks are given the same minimum capital level irrespective of their individual risk portfolios.

The regime is in line with the Basel framework of banking supervision, a model the BoG started implementing about a decade ago but suspended it in 2008.

However, some of the tenets of the Basel framework have been incorporated into the Banks and Specialised Deposit-Taking Institutions (SDIs) Act, 2016 (Act 930) in anticipation of its full implementation.

Readiness of banks

The survey revealed that only 29 per cent of respondents said they were ready and prepared. However, out of the 71 per cent which responded in the negative, 47 per cent said they had begun possible approaches; 18 per cent said they had agreed  to plans and resources in place, while six per cent indicated their existing plans would substantially support the migration.

According to the central bank, results of a similar survey it conducted in April last year indicated that a majority of the banks were ready for the new framework.

Dr Addison explained that while some banks had already carried out a gap analysis between their current risk management practices and the Basel regulatory framework, others were waiting for the regulator for direction. 

He said the survey also showed that the Basel regulatory framework implementation would not pose any major financial setbacks for the industry, but instead offer banks the opportunity to enhance risk management practices in their operations.

In line with the implementation, Dr Addison said the central bank had built the capacity of its staff to undertake a seamless implementation of the framework.

The governor admitted that the adoption of the Basel regulatory framework for the banking industry was long overdue, saying “the global financial system is continually evolving and Ghana cannot continue to lag behind in transforming its banking sector in line with international standards and practices.”


The President of the bankers’ association and Managing Director of Stanbic Bank, Mr Alhassan Andani, cautioned that the implementation of the Basel framework should be done with broadening the risk scope.

“For us in the banking industry, risk starts with macro economic issues and stability. We also need to respect financial contracts as a people and this runs through to our governments. When we flout financial contracts, it feeds back into the banking system to affect the quality and quantity of capital that we keep,” Mr Andani stated.

Country partner

The Country Senior Partner, Mr Wyczynsky Ashiagbor, told the Daily Graphic that the 2017 survey, which was based on 2016 numbers, indicated that banks generally faced challenges due to the unstable macroeconomic environment, which saw their non-performing loan portfolios rise.

However, the sector remained strong, resilient and continued to do good business, with a positive outlook, adding that the implementation of the Basel framework would help the banks to be even more resilient as it would require them to measure risk on a targeted basis.

Mr Ashiagbor said although the banks believed they were ready for the implementation, the real picture could only become clearer if the central bank finally gave directives.