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BoG Pushes For Mergers & Acquisitions
 
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26-Apr-2018  
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The Central Bank says it’s fashioning out modalities for possible acquisitions and mergers in the country’s banking sector ahead of the December 31, 2018 deadline for recapitalization.

According to the regulator, it would not renege on its directive to both foreign and indigenous players to shore up their capital to GH¢400 million from the current GH¢120 million, adding that this is to help prepare them to take advantage of big ticket transactions.

Even though local banks have called for its postponement, the regulator insists it will inure to the benefit of players.

Elsie Addo Awadzi, Second Deputy Governor of the Bank of Ghana (BoG), who disclosed this on Tuesday in Accra at a breakfast meeting, said: “We will facilitate banks’ mergers and acquisitions and other transactions by issuing some guidelines on the process.”

She also added that the Bank of Ghana expects all banks to comply with the requirement by the specified date of December 2018.

“It remains our view that this new capital floor will help make banks stronger and resilient, and position them to better support the Ghanaian economy.”

Capital restoration plans

She also said her outfit was currently supervising banks’ submission of capital restoration plans, noting that persistent liquidity shortfalls had become the norm for a number of banks as a result of poor credit risk and liquidity risk management practices.

“As a result, a number of banks were heavily dependent on the Bank of Ghana’s emergency liquidity assistance (ELA) as their main source of liquidity. To avoid such undue reliance on ELA with attendant moral hazard risks and credit risks for the Bank of Ghana, the Bank of Ghana has initiated a review of its ELA framework to make it more robust and less prone to abuse.”

Poor corporate governance

Touching on corporate governance, the second deputy Governor said poor governance practices were prevalent in some banks, associated with concentrated shareholding structures with control exercised by one or two key shareholders sometimes to the detriment of depositors, little or no independence on bank boards and the lack of compliance with the fiduciary responsibilities of bank directors.

To strengthen corporate governance in the industry, she said the Bank of Ghana had recently published the Corporate Governance Directive, which all banks are required to comply with forthwith.

Breaches

Regarding regulatory breaches, she said there were wanton breaches of regulatory requirements such as failure to submit prudential returns; breach of single obligor limits; breach of exposure limits on related party loans/transactions and misreporting of financial data and others.

Restricted borrowing

Customers of commercial banks would be restricted in their borrowings from any bank in the coming months if they did not have a credible loan repayment track-record.

This will follow the strict enforcement of the new Borrowers and Lenders Act by commercial banks in the country.

The Bank of Ghana has served notice it is currently engaging industry players for a repeal of the current law on borrowing and lending.

“We also hope that banks will do their part so that the entire current infrastructure in place is working well. We are actually proposing a repeal of the Borrowers and Lenders Act and the replacement of the Act. It is early days yet as the law is currently going around the major stakeholders for their inputs,” she stated.
 
 
 
Source: Daily Guide
 
 

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