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Ghana cenbank triples minimum bank capital requirement
In a bid to reform Ghana's financial sector and ensure stability, the Bank of Ghana has tripled the minimum capital requirement for commercial banks to from 120 million Ghana cedis to 400 million Ghana cedis. Sulemana Mohammed, CEO Doobia, joins CNBC Africa from Ghana to discuss the impact this would have on the country's banking sector and the wider economy.
Wed, 13 Sep 2017 07:53:05 GMT
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AI Generated Summary
- The Bank of Ghana has raised the minimum capital requirement for commercial banks from 120 million Ghana cedis to 400 million Ghana cedis to strengthen the financial sector and support the government's economic agenda.
- The increase in capital requirement is expected to drive consolidation in the banking sector, leading to fewer but stronger banks that can support Ghana's industrialization and development initiatives.
- The decision has caused turbulence in the stock market, with bank stocks experiencing volatility as investors reevaluate their positions in light of the new regulatory framework.
In a surprising move that has sent shockwaves through Ghana's financial industry, the Bank of Ghana has announced a significant increase in the minimum capital requirement for commercial banks. The new minimum capital requirement has been raised from 120 million Ghana cedis to a staggering 400 million Ghana cedis, equivalent to approximately 91 million US dollars. The decision, which caught many analysts off guard, is part of the central bank's efforts to reform the country's financial sector and ensure its stability in the long run.
Sulemana Mohammed, the CEO of Dubia, shared his insights on the implications of this drastic change in an exclusive interview with CNBC Africa. According to Mohammed, while the figure of 400 million Ghana cedis was higher than expected, there are clear reasons behind the central bank's decision. The Bank of Ghana aims to create a stronger and more stable banking system by encouraging mergers and acquisitions among banks to meet the new capital requirement.
Mohammed highlighted that the move towards the increased capital requirement aligns with the government's ambitious industrialization agenda, which requires well-capitalized banks to support the country's economic transformation. The recapitalization would enable Ghanaian banks to finance critical sectors such as oil and gas, cocoa, and infrastructural development, driving economic growth and job creation.
One of the immediate impacts of the new capital requirement is the potential consolidation of the banking sector, as smaller banks may struggle to meet the higher threshold. Mohammed predicted that Ghana could witness a reduction in the number of commercial banks from the current 34 to less than 30 after the consolidation process is complete. This consolidation is expected to result in fewer but stronger banks that are better equipped to drive the country's economic agenda.
The increase in the minimum capital requirement has also reverberated through the stock market, with bank stocks experiencing volatility in response to the news. Some banks saw a decline in their stock prices as investors reacted to the uncertainty surrounding the sector. Mohammed acknowledged that investor confidence in bank stocks may be temporarily affected as market participants assess the implications of the new capital requirements.
As Ghana continues to navigate its economic landscape, the decision by the Bank of Ghana to triple the minimum capital requirement for commercial banks marks a pivotal moment in the country's financial sector. The road ahead will likely see increased consolidation, stronger banks, and a renewed focus on supporting the government's development agenda through robust financial institutions.
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