GHANA’S Central Bank has described as inaccurate reports that foreigners are taking over the country’s banking industry, in the wake of increased efforts by the regulator to get banks well capitalised.
Governor, Dr Ernest Addison said “the data that we have does not suggest that there is no foreign dominance of the banking sector.”
“In fact, if you look at the numbers in terms of banks that are domestically controlled and those that are foreign controlled, I think the numbers are just balanced,” he stated.
The new rule requiring licensed banks in Ghana to increase their minimum capital levels to GH¢400million by December 31, 2018 has received varied responses.
Advocates of the directive point to an increase in capital buffers to absorb possible external shocks and trading losses.
Additionally, advocates cite the potential for bank consolidations, positing that the banks that survive will be in a stronger position to underwrite higher ticket transactions and achieve economies of scale.
Critics have however decried the “one-size-fits-all” approach to Bank regulation. Not all banks need to be big, they argue.
Furthermore, they have contended that local banks will struggle to independently meet the new requirements, resulting in a banking sector that is dominated by externally–controlled banks.
The Chartered Institute of Bankers (CIB), Ghana has urged the regulator to avoid a blanket implementation of its policy to get banks in the country to recapitalise. In its view, the segmentation of banks will allow lower tier banks that have met the initial threshold to serve particular sectors of the economy with innovative products and services whilst banks with increased capital base (higher tier banks) finance bigger projects.
Players welcome assurance
Contacts made by this paper with some heads of banks in the country revealed satisfaction and commendation for the Governor.
Managing Director of The Royal Bank, Mr Osei Asafo-Adjei described the development as “interesting.”
According to Head of Corporate & Investment Banking at Stanbic Bank Ghana Kwamena Asomaning, the Bank of Ghana has the facts and so is well placed to ascertain whether or not there is foreign dominance.
“It’s good the regulator allays fears because it engenders confidence in the industry, he added.
BoG justifies Deposit Insurance Scheme
The governor maintained that the steady growth in the number of financial institutions coupled with the increasing complexities of the financial sector in recent times required more urgently, that an insurance scheme, together with the tightening up of the bank’s supervisory role is put in place.
This, he explained was the development of a system that will guarantee the safety of depositors’ funds.
“Banks are getting into consolidated arrangements with affiliates in capital markets, insurance firms; those engaged with real estate companies…these are all part of the complications we see in the financial system.
“So we can have the most prudent application of banking rules, have the most effective oversight over the financial sector to anchor stability but then, you also need that deposit insurance scheme to provide the additional safety net to boost confidence in the financial sector especially for small depositors,” Dr Addison said.
“All things being equal, we expect that with a strong and well-capitalized bank, at least the sector will be well positioned to offer safer services to customers than in a situation in which the banks had weaker capital,” he explained.
Adequate capital is also key to ensuring financial stability. Not only is the regulator looking at deposit insurance but also emphasizing on the importance of banks having adequate capital.
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