BoG outlines three ways of banks recapitalisation

The Bank of Ghana (BoG) has officially revised the minimum capital of banks to GH¢400 million, in a public notice that also seeks to educate the banks on how to meet the new requirement.

The notice, published Monday afternoon, notes that banks would be required to meet the required minimum capital through three main ways; fresh capital injection, capitalisation of income surplus and a combination of fresh capital injection and capitalisation of income surplus

The central bank warned that banks will not be allowed to “capitalise revaluation reserves, reserves on financial instruments through other comprehensive income, statutory reserves, credit risk reserves and unaudited profit.”

Existing banks have up to December 31, 2018, to meet the new minimum paid up capital requirement in line with Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).

Although the December 2018 deadline applies to operating banks and those with licences (“Approval in Principle”), the BoG said “all pending applications for banking licence i.e. without “Approval in Principle” are required to meet the new minimum capital requirement of GH¢400,000,000.00 and the feasibility reports accompanying such applications are to be amended accordingly.”

As part of the criteria, the central bank said are required to maintain a minimum unimpaired paid up capital as per Section 28 (1) and (3) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) of GH¢400 million by end of December 2018.

They explained that the recapitalisation was necessitated by understanding that “banks would require a more sophisticated and robust capital framework, adequate to transform the banking sector and consistent with the growing risks, levels of sophistication and exposure banks are currently facing.”