Dr Ernest Addison — Governor, Bank of Ghana
Dr Ernest Addison — Governor, Bank of Ghana

Banks recapitalisation: BoG urged to be supportive

In view of the negative impact of the government’s Domestic Debt Exchange Programme (DDEP) on the country’s banking sector, a financial analyst with Deloitte Ghana wants the Bank of Ghana to be more supportive in its approach to have the banks recapitalise. 


Dennis Brown said as against an overly strict and punitive approach such as license withdrawal, among other things, BoG must take into consideration the fact that the challenges the banks face now were not self-inflicted but one occasioned by an action of government.

Government, as part of efforts to secure a $3 billion bailout deal with the International Monetary Fund (IMF), was compelled to undertake a major debt restructuring exercise meant to reduce its debts to sustainable levels over the medium term.

The debt exchange exercise which was mostly patronised by players in the banking sector resulted in creating serious financial challenges as 16 of them recorded heavy losses at the end of the 2022 financial year.

For instance, the industry posted before-tax losses of GH¢8.0 billion in 2022 compared with a profit of GH¢7.4 billion recorded in 2021.

After-tax loss was GH¢6.6 billion in 2022 relative to profit-after-tax of GH¢4.8 billion in 2021.

The main profitability indicators, namely, return-on-assets and return-on-equity all turned negative in 2022 because of the industry’s loss position.

Much as the banks turned around their profitability fortunes in the first quarter of the year, most of them still face enormous challenges as their stated capital has dropped, a development that has forced the central bank to direct all banks whose capital have been affected by the DDEP to submit their recapitalisation plans to the bank by end of September this year for review.

They are, according to the BoG, expected to approach their shareholders first to recapitalise their business or resort to the yet-to-be- operationalised Financial Stability Fund for assistance.

Until the DDEP, banks in the country had been resilient and fairly stable after the financial sector clean up saw their stated capital raised to a minimum of Ghc400 million.

Under the circumstance, Mr Brown expects the BoG to be more supportive in its approach to get banks which capital have been affected to recapitalise.

 “In this regard, where BoG needs to offer support, priority must be given to banks hard hit by the DDEP,” he said.  

Capital Adequacy

The Banking Act in the country stipulates that banks must operate with the minimum Capital Adequacy Ratio (CAR) as prescribed by BoG in order to be considered as financially safe and healthy for investors, customers and the banking industry as a whole.

Industry watchers are of the view that, it is therefore within the rights of BoG, as mandated by law, to request banks with CAR less than 10 per cent to recapitalise.

They held the view that, aside the legal consideration, such a move is healthy for the banking industry and the larger financial services sector which has been ruffled by the DDEP.


Meanwhile, ahead of the submission of the recapitalisation plans, some banks, mostly foreign owned, have approached their shareholders for support.

An unnamed source from one of the foreign owned banks said “our mother bank is too big to see us fail so we have firm assurances of recapitalisation.

The source referred to competition in the market and noted that since all the banks, particularly the foreign owned ones, will be supported by their main shareholders, “we cannot afford to lose out”.

Analysts have said that the banks likely to fall on the BoG for support will be largely the locally owned banks which have no external shareholders.

It is not immediately clear when the financial stability fund would be operationalised but it is expected that after the IMF released the $604 million, measures will be put in place to keep the banking sector afloat.


Last week, the government announced that it had secured a $350 million from the multilateral agencies to operationalise the Financial Sector Stability Fund.

The fund is made up of $250 million from the World Bank and $100 from the African Development Bank.

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