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Banking Sector To See New Reforms
   News: Banking News

The Bank of Ghana (BoG) has hinted of a possible set of reforms in the banking sector that could see all banks in Ghana listing on the country’s stock market.

Such reforms, according to the regulator would help provide “another pair of eyes in addition to the regulators to superintend operations

Governor of the BoG, Mr Kwesi Arthur-Amissah who dropped the hint during the launch of a Code of Standards by the Ghana Association of Bankers for its members said the move could also help eliminate the “unwillingness among Ghanaian bank owners to share control with fellow Ghanaians.

“I have always woundered whether the next set of reforms should not require every bank to be listed on the stock market,” the governor said further observing that such a directive would be “a definate boost for corperate governance and enterprise wide risk management.”.

Mr Arthur-Amissah’s hint comes at a time when some commercial banks in the country are red-eyed, strategising to meet the BoG’s intiatial directive that mandated all banks in the country to recapitalise to the tune of GH¢60 million before December 2012.

Currently, Ecobank Transnational Incorporated (ETI) is finalising modalities towards acquiring a large stake in the Trust Bank Limited (TBL) as the later staggers to raise the required GH¢60million before the fast approaching December 2012 deadline.

The ETI-TBL acquisition trails an earlier instance where Bank of Baroda secured a majority stake in Amal Bank Limited, a deal that would see the name and ownership of Amal Bank changing.

Industry sources also speculate that HFC Bank and CAL Bank are seriously considering a possible merger or acquisition to strenghen their respective capital base. Both sides are, however, tight-lipped as to which of the two measures is key on their agenda except to say “all the various pocesses are on our cards.”

What is however certain is that both banks would not remain as separate entities after the December 2012 recapitalisation deadline.

The Ghana Assciation of Bankers (GAB), the umbrella body of banks in the country has, meanwhile prayed the regulator to allow market forces in the industry to determine the sizes and capacities of banks in the country rather than causing what it referred to as “artificial mergers and acquisitions” as was currently happening in the sector.

The association is of the view that the free market nature of the country’s economy only made it fair that the Bank of Ghana allowed competition and maturity in the sector to determine the adequacy ratios and expansion reach of the respective banks against pressuring them to raise capital they may not need.

Answering questions from a cross section of the media on developments in the banking sector, the association’s president, Mr Asare Akuffo maintained that the BoG’s GH¢60 million recapitalisation limit for all banks operating in the country could possibly cause banks to hold monies they do not need and further lead to artificail mergers and acquisitions in the industry as is currently happening.

The GAB President is particularly not too comfortable with the present mergers and acquisition spree in the industry.

“All these are artificial mergers. Rather than causing these artificial mergers and acquisitions in the industry, the BoG should adopt a more favourable measure that would allow banks the space to expand at will,” he said.

He further cautioned that banks with low adequacy ratios and would therefore not be in the position to raise the needed GH¢60million by themeslves “should not be forced to raise and hold capital they would not need.”

That, according to Mr Akuffo was capable of replicating the Nigeria incidence where recapitalised banks later experienced instabilities causing the Central Bank of Nigeria to intervene with huge sums of Nairas to bail them out.

Mr Akuffo’s stance is part of a larger view experessed by stakeholders (pro-indegneous banks) of the industry that smaller banks should by choice be left to remain small and handle smaller transactions, taking into consideration the difficulty involved in raising the needed GH¢60 million before December 2012.

The Central Bank, however, disagrees.
“The impression should not be created that the only source of funds for investment is beyond our shores. How many of our banks have explored the opprtunities offered by our local stock exchange?” the governor asked, rather retorically.

He noted that intial attempts by some banks in the country to raise capital locally by floating their shares on the GSE saw those offers being over-subcribed or being successful.

According to him, the recapitalisation directive was necessitated by “the anticipated expansion in the economy, especially with the emgering of oil in the country.”

Mr Arthur-Amissah said it was regretable that the Central Bank was regularly called in to grant waivers of single obligor limits to enable the importation of crude oil and petroleum products due to commercial banks’ financial inabilities to take up those deals.

“It should be possible for our banks to grow and to enable them finance large transactions or use syndication as a tool for handling occassionally extra-ordinary lumpy transactions,” the governor noted.




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