BoG increases minimum capital for new banks

Commercial Banks who want to start businesses in Ghana would soon be required to have a minimum capital of 120 million cedis.

Rural banks are also required to have a stated capital of 300 thousand cedis, an up from 150 thousand.

Non-bank financial institutions would also have to up their capital by as much as 100 percent - 15 million cedis.

The First Deputy Governor of the Bank Ghana, Millison Narh announced this at Ghana Association of Bankers Business Luncheon Thursday.

He later explained to Joy Business that the increments have been done to ensure "a strong financial system to support the real sector of the economy.

He also added that these increases are necessary in order to provide the institutions with the muscle to undertake big-ticket deals to support the growth of the private sector and to further serve as a capital cushion for absorbing unexpected losses that may arise in the normal course of business.

He took the opportunity to advise industry players, particularly the banks, to properly align their risk appetite to their capital levels.

This, he said, is important because any misalignment between risk and capital could threaten the solvency of institution and unduly put shareholders investments at risk.

Millison Narh said subsequent to these capital enhancements, the central bank has initiated action towards gazetting the increases as required by law.

He noted that to further strengthen their supervisory function, the Bank of Ghana has also initiated action toward the revision and consolidation of the existing laws that govern the Banking and Non-Bank Financial Institutions.

The deputy governor said "we envisaged that these initiatives would remove any potential vulnerabilities in the banking landscape to ensure a safe and sound banking practices across the industry.”

Source: myjoyonline.com