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Update on Banking Sector Reforms -January 2019

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The Bank of Ghana as part of its comprehensive reform agenda, with the objective of cleaning up the sector and strengthening the regulatory and supervisory framework for a more resilient banking sector, licences of seven (7) insolvent banks were revoked over the last sixteen months.

Steps were taken to ensure that they exited the market in an orderly manner.

These were in a statement issued by the Central Bank in Accra, December 4, 2019.

The statement said the Central Bank inherited a financial system which was under a considerable state of distress, with banks that were not meeting the capital adequacy requirement and others whose capital was eroded with high non-performing loans.

Some of these banks according to the statement, were insolvent and illiquid, others were solvent but illiquid.

This state of affairs according to the statement was largely as a result of poor corporate governance, false financial reporting, and insider dealings.

“The Bank of Ghana had in the past continued to provide liquidity support to these failing banks, without addressing the underlying problems that led to the illiquidity and insolvency of these institutions.” It added.

“In short, the financial system had reached a tipping point and we could not have assumed business as usual.”

UPDATE ON RECAPITALISATION EXERCISE

He said following the recapitalisation exercise that ended at the close of business on December 31, 2018, there are now twenty three (23) universal banks operating in Ghana.
These banks according to the statement, have all met the new minimum paid-up capital of GHC400 million.

• Sixteen (16) banks have met the new minimum paid-up capital requirement of GH¢400 million mainly through capitalisation of income surplus and a fresh capital injection.

• The Bank of Ghana has approved three (3) applications for mergers.

Consequently, First Atlantic Merchant Bank Limited and Energy Commercial Bank have merged, Omni Bank and Bank Sahel Sahara have merged, and First National Bank and GHL Bank have merged.

The three (3) resulting banks out of these mergers have all met the new minimum capital requirement.

• Some private pension funds in Ghana have injected fresh equity capital in five (5) indigenous banks through a special purpose holding company named Ghana Amalgamated Trust Limited (GAT).

In addition to the state-owned banks (ADB, NIB) benefiting from the GAT scheme, the other beneficiary banks (the merged Omni/Bank Sahel Sahara, Universal Merchant Bank, and Prudential Bank) were selected by GAT on the basis of their solvent status and good corporate governance. More details about the GAT scheme will be provided by GAT and the Ministry of Finance.

To ensure that the capital provided by banks indeed represents quality capital in the amounts required to meet the Minimum Capital Directive, the Bank of Ghana adopted and implemented a rigorous capital verification process. In the process, the Bank of Ghana has undertaken comprehensive due diligence on new investors in banks and has verified the sources of funds for the recapitalisation.

The verification process is still on-going and will be validated by external auditors of banks as part of the 2018 external audit.

RECAPITALISATION AND RESTRUCTURING OF STATE-OWNED BANKS

Resources from GAT will be used to recapitalize the two state-owned banks (ADB and NIB) to help drive and promote long-term sustainable financing for agricultural and industrial expansion.

The Government has notified the Bank of Ghana that it intends to restructure NIB through governance and management reforms as well as streamlining its business model to help refocus it as a bank to support industrialisation.

To help ensure that these reforms succeed, the Bank of Ghana has today appointed an advisor for NIB, pursuant to section 101 (1) of the Banks and Specialized Deposit-Taking Institutions Act of 2016 (Act 930), to advise management of the bank with a view to helping improve the affairs of the bank.

The Advisor will hold office until otherwise advised by the Bank of Ghana and will furnish the Bank of Ghana with a status report on the bank in three months and as frequently as the Bank of Ghana may require.

 
Attached Below Is The Full Statement:
PRESS RELEASE -Update on Banking Sector Reforms -January 2019 -V4 clean

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