An economist and investment consultant, Mr Kwame Pianim, has asked the Bank of Ghana (BoG) to stop issuing licences to new banks and rather encourage mergers and acquisitions in the sub-sector.
The financial landscape currently has 27 universal banks, 63 non-bank financial institutions (NBFIs), including finance houses and savings and loans companies, mortgage finance houses, remittance establishments and leasing companies.
Despite the over crowdedness of the financial landscape, a survey conducted by FinScope in 2010 indicated that 56 per cent of adult Ghanaians equalling 7.5 million individuals are financially included.
Making a case for the need for more mergers at the inauguration of the Association of Finance Houses (AFH), Mr Pianim said, “Hopefully, the time has come probably for the Central Bank to stop giving licences and encourage mergers and acquisitions. Most of these institutions are poorly capitalised and we need to reposition them to be capable of meeting the finance needs of the larger economy.”
“It is becoming more and more difficult for banks and finance houses to survive and this may be a wakeup call for mergers and acquisitions,” he said.
BoG revised capitalisation
The minimum statutory capital requirement for finance houses was reviewed upwards from GH¢7million to GH¢15million, but according to the governor of the Bank of Ghana (BoG), Dr Henry Wampah a number of the finance houses remain below the minimum capitalisation.
Mr Pianim attributed the inability of finance houses to meet the statutory capital requirement to challenges in the domestic economy.
For universal banks, the BoG reviewed upwards the minimum capital required from GH¢60 million to GH¢120 million. Microfinance institutions (MFI) are also expected to have a minimum capital requirement of GH¢250,000 by June 2015, grow it to GH¢500,000 by June 2016, and finally have a stated capital of GH¢2million by December 2018.
Meanwhile, the minimum paid-up capital requirement for obtaining a rural/community banking licence is now GH¢1,000,000 for new applicants.
The already licensed rural/community banks are expected to raise their minimum paid-up capital to GH¢300,000 by December 31, 2015, GH¢500,000 by December 31, 2016 and GH¢1,000,000 by December 31, 2017.
Two new bills
Dr Wampah said two bills aimed at strengthening corporate governance as well as helping bring sanity into the financial services sector, were before parliament for passage.
They are the new Bank and Specialised Deposit Taking Bill and the Deposit Insurance Bill.
“When passed, the bills will introduce measures to help strengthen corporate governance, provide for orderly resolution of distressed institutions and improve risk management systems in the sector.”
He explained the rationale to be part of efforts by the central bank to build resilience into the banking system, stressing that “when the bill is passed into law, institutions that are not in compliance with regulatory requirements such as capital and capital adequacy will not be admissible into the scheme.”
With the aim of becoming a robust financial model globally, the BoG, he said would not hesitate to revoke the licenses of financial institutions that breach regulatory requirements after the introduction of those new laws.
According to Dr Wampah, the world is dynamic and as such change is constant and “the central bank will consistently dialogue with operators in the industry on strategic and operational issues with the view of ensuring that the model becomes a point of reference globally.”
The Association of Finance Houses
The President of AFH, Mr Oko Nikoi Dzani who alluded to the challenge of meeting the capital requirement, expressed the hope that the BoG would extend the deadlines for members to meet the requirement.
Touching on the association, he said it would push for self-regulation among members to bring sanity into the sector.
All the 27 licenced finance houses operating in the country are members of the AHF.
Source: Graphic