GSE To Reap From New BoG Figure
GSE To Reap From New BoG Figure Website
The Ghana Stock Exchange (GSE) is in the midst of events to witness brisk activity in the short to medium term, following the announcement of a new minimum capital requirement for the banks by the Bank of Ghana (BoG). Even though some concerns have been raised at the new policy, B&FT's cross sectional interview shows that the banks seem ready to face the future. Ghanaian owned banks, defined by at least 51 percent of shares held by Ghanaians, are eyeing the Ghana Stock Exchange to raise the additional capital. Most of them however pointed out that the burden would be on the institutional shareholders. They noted that it is very involving to raise capital from the bourse so far as processes and compliance are concerned but given the long-term, it may turn out to be a better option. For the foreign owned banks, the new requirement is not much of a challenge because they are leaning on their parent banks. Some of the Ghanaian owned banks are GCB, ADB, HFC Bank, CAL Bank, Fidelity Bank, First Atlantic Merchant Bank, Prudential Bank, Merchant Bank, NIB, and The Trust Bank. The foreign ones include Standard Chartered Bank, Barclays Bank, Stanbic Bank, Baroda, Zenith Bank, UBA, Intercontinental Bank, and Guarantee Trust Bank. After broad consultation with the industry, BoG has set the minimum capital requirement for obtaining a Class 1 banking license (universal banking) at GH¢60 million. Existing banks are required to attain this minimum by December 31st 2009 while Ghanaian owned banks have been given a longer time frame to consolidate. Under the directive, banks with local majority share ownership will have to attain a capitalization of at least GH¢25 million by the end of 2010 and GH¢60 million by 2012. Though the Ghanaian owned banks complain that the grounds in the next four years has been made uneven by the coming into force of the new policy, the Head of Research at BoG, Dr. Ernest Addison has responded by saying that the time differences along with the different figures is a short term arrangement to enable them to consolidate confidently. He said the new requirement has become necessary now to support government's broader goal of making the economy self reliant. Among others, the liberalization of the foreign exchange Act following the adoption of the new Foreign Exchange Act 2006 (Act 723) in December 2006 to replace the Foreign Exchange Control Act 1961 (Act 71) requires that banks be well capitalized to perform varied foreign exchange transactions. For Ghana to be middle income by 2015, the economy is supposed to be growing at 8 percent and more. Coupled with the oil find to begin drilling next year, banks must to be well positioned capital wise, to be able to finance high fund projects and other business growth demands expected in the private sector. "Else the benefits would go to foreigner finance institutions," Dr. Addison noted. With the liberalization of the foreign exchange Act, residents be it Ghanaian or foreign can maintain foreign exchange accounts. Out of these accounts, transfers between US$10,OOO and US$25,OOO per transaction can be made without documentation while dealer banks may freely export foreign currency. Residents can give loans to non-residents without restriction while there are no restrictions to outward direct investments. Enough liquidity is therefore required in the system for such transactions to go on without prejudice to neither the economy nor the local currency.