The Bank of Ghana (BoG) says it has received proposals from some banks to consolidate with their peers to enable them to meet the central bank's new capital requirement of GH¢400 million
The Governor of the BoG, Dr Ernest Addison, told journalists in Accra on Monday that the said banks had since opened preliminary discussions among themselves, aimed at preparing the ground for possible consolidation.
Although he declined to name the banks involved, he indicated that those banks had approached the BoG on the issue of consolidation.
He was hopeful that the discussions around consolidation would lead to concrete mergers and acquisitions to help strengthen the balance sheets of the banks in the country.
“We have no doubt in our mind that the consolidation is necessary in terms of our ability to help the economy to develop,” Dr Addison said at a press conference in Accra, during which the BoG’s Monetary Policy Committee (MPC) maintained the bank’s benchmark rate, the policy rate, at 21 per cent.
The governor said a closer look at the structure of banks in the country would reveal a cluster of small banks with less than five per cent share of deposits.
“Similarly, you will find another or the same cluster of banks with assets that are less than five per cent. These are really 10 or 15 banks and so we expect some consolidation to happen around them,” he said.
While the BoG believed that bank consolidation was necessary for the proper growth of the banking sector, he said, it had decided to allow market forces to determine how and when banks would consolidate.
“We want it to be market-driven, such that the market will decide how they want to consolidate to be able to meet the minimum capital. All we will do is be there to guide them in terms of how these mergers should be done,” he added.
A former Deputy Governor of the BoG, Mr Emmanuel Asiedu-Mante, said the decision not to interfere in the consolidation process was the best, given that the issue of consolidation was the preserve of shareholders.
“Do not forget that these banks are limited liability companies with boards of directors who take some of these decisions. So the BoG should not be seen to want to micro-manage them,” he said.
On the policy rate, Dr Addison explained that the decision to maintain the policy rate at 21 per cent followed emerging risks to the inflation outlook.
That was the first time this year that the MPC, chaired by Dr Addison, had maintained the rate, which serves as a guide to banks in the setting of lending rates.
Since January this year, the MPC has reduced the rate cumulatively by 450 basis points in response to weakening risks to inflation and ostensibly to help ease monetary pressures for interest rates to come down.
The governor, however, noted that the committee had observed that the recent upward adjustment in ex-pump petroleum prices could “likely transmit through prices in the coming months and pose some risks to the inflation outlook”.
As a result, he said, the MPC had decided that it was time to pause the easing cycle, in view of emerging risks to the inflation outlook.
He added that the bank would continue to be vigilant and committed to responding and taking the necessary policy actions, should those initial signs of underlying pressures persist.
As a signal to the direction of inflation, Mr Asiedu-Mante, who retired from the BoG in 2006, said the decision to maintain the rate at 21 per cent meant that the central bank thought that there were inflationary pressures in the economy.
“If it were comfortable with the risks to inflation, it would have lowered it, but for it to maintain the policy rate means that the MPC has reason to believe that there are some uncertainties ahead,” he said.