As it stands now, there are no concrete signs that the six banks (names withheld) are succeeding in their frantic attempts to beat the deadline of December 31 this year, to raise their stated capital to GH¢400 million.

This means that should the deadline expire, the central bank will either be forced to downgrade them to savings and loans companies or will have their licences totally revoked.

The latter action, should it happen, is likely to worsen the already turbulent situation within the banking sector where depositors are engaging in panic withdrawals because of their lack of confidence and increasing uncertainty in the system.

Meanwhile, the Governor of the Bank of Ghana (BoG), Dr Ernest Addison, said at the last Monetary Policy Committee (MPC) news conference for the year in Accra on Monday, that the deadline for the bank recapitalisation would be stayed at December 31.

“Deadline for the bank recapitalisation is unchanged at end-year 2018,” he said.

This was despite concerns by some experts in the banking sector that should the deadline remain unchanged, many banks would be unable to recapitalise.

The BoG earlier indicated that 22 out of the existing 28 universal banks in the country had met the new capital requirement as of the end of September this year.

This means that the remaining six banks have barely five weeks to meet the new minimum paid-up capital requirement in line with the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).

BoG monitoring

Dr Addison said the BoG was closely monitoring and working with the banks towards their recapitalisation efforts to ensure a formidable banking sector next year.

He said many banks were close to meeting the new minimum capital while a few more remained in merger talks. The governor, however, failed to disclose the exact number of banks which had met the requirement as of this month.

“We are happy to note that many banks are close to meeting the new minimum capital requirement and a few are concluding discussions on mergers.

“We expect 2019 to commence with a well-capitalised and robust banking system with no weak institution,” he said.

Savings and loans

Asked about the fate of savings and loans companies, Dr Addison said although the BoG was aware of pockets of distressed institutions in the sector, the central bank was monitoring the activities of all Monetary Financial Institutions (MFIs) to ensure their soundness.

“We are working closely with the Ministry of Finance on a plan to resolve these problems in the sector with a view to restoring trust and confidence,” he said.

Improvement in financial sector

Analysing the Financial Sector Indicators (FSIs), the governor said the figures broadly showed improvement since the last MPC meeting in September, reflecting gains from the ongoing reforms in the sector.

He said the gains were expected to further increase after the recapitalisation process was completed in December this year.

“The industry’s total assets increased to GH¢106.3 billion in October 2018, representing a year-on-year growth of 19.6 per cent.

“Of the total assets, advances and investments constituted 33.4 per cent and 40.3 per cent respectively,” he said.

He explained that the FSIs showed that the banking system was solvent, sound and profitable.

“The industry’s solvency, measured by the Capital Adequacy Ratio (CAR), improved to 20.0 per cent in October 2018 from 18.0 per cent in the same period last year,” he said.

Stay of policy

The BoG has also stayed the policy rate at 17 per cent owing to escalating global trade tensions, steady rise in global inflation, further hikes in US interest rates and stronger US dollar.

Dr Addison explained that although inflation was forecasted to remain within the medium-term target band, the bank’s latest assessment indicated that there were underlying pressures, hence the stay in the policy rate. 

He, however, said the recent significant decline in crude oil prices since mid-October 2018 by about 24 per cent could lower ex-pump prices and moderate the risks going forward.