Home Business Seven more banks deemed distressed

Seven more banks deemed distressed

Deputy Finance minister has urged the Bank of Ghana to keep a close eye on distressed banks following the collapse of two Ghanaian-owned banks, UT Bank and Capital Bank.

Kwaku Kwarteng would not give names of banks deemed to be on the brink but before the collapse of the two, the central bank had indicated there are Seven other banks classified as distressed.

The two collapsed banks represent the severer cases of banks under pressure, Kwaku Kwarteng said on Joy FM Super Morning Show Monday.

“…in respect of the other banks that are distressed to varying extent, the BoG will monitor them closely and step in as soon as it appears to the BoG that the interest of depositors and other participants are threatened”.

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“We are urging them to be alert”, he said, backing the Bank of Ghana’s decision to withdraw the licenses of the troubled two.

He said the decision was taken independently of government influence or control as would all other decisions by the central bank in this respect.

“I am not in a position now to say which bank will go next or whether at all, any bank will go,” he said.

Talks about acquisitions and mergers in the banking industry have grown louder since BoG signalled, it would increase the capital requirement for operating a bank.

A bank needs ¢60million to operate in Ghana, a figure which has been criticised by analysts as too low.

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According to the accounting firm, PriceWaterhouseCoopers, in real terms, the minimum capital of ¢60 million has significantly eroded as the cedi to dollar parity has declined from less than 1 to almost 4.5 times.

The BoG has also explained re-capitalisation “has become more necessary because of weak economic growth and weak credit management skills” which are affecting performance in the financial sector.

The new requirement is expected in September after the central bank completes its work on the distressed banks.

Figures such as ¢250 million, ¢300 million or even ¢500  have been bandied around as the possible requirements to be announced.

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Managing Director of Cal Bank, Frank Adu Jnr has argued one billion cedis should be set as the capital requirement to sanitise the banking industry.

Although a decision is yet to be made, JOYBUSINESS understands that not all the over 30 banks would be able to meet the new capital levels.

Ghana’s banking system has been criticised as having too many banks. With a 25million population, Ghana has 37 banks while Nigeria with 187m has 31 banks.

Source: myjoyonline.com

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