Banks prepare to meet minimum recapitalization

Bank of Ghana

Ghanaian banks are preparing to meet the newly announced minimum capital requirement as required by the Bank of Ghana (BoG).

The banks are expected to increase their minimum capital from GHC120 million to GHC400 million by December, 2018.

The increase meant that, new entrants into the banking industry have to cough the GH¢400 million amount while existing banks were given up to December 2018 to meet the new minimum capital requirement.

The GH¢400 million represented a jump of 233.3 percent from the previous GH¢120 million set by the regulator for commercial banks in the country.

Although, the bankers have accepted to comply with the new directives from the central bank as they have no option, they have however complained of the quantum of leap in the increase.

However, some of the banks have started looking for avenues to help them meet the minimum capital before the deadline.

The First Atlantic Bank, last week announced that it has finalized an agreement with Advanced Finance & Investment Group (AFIG Funds), manager of AFIG Fund II for an investment in their Bank.

Although, the Fund’s investment is subject to regulatory approval.

Moreover, another giant of the industry, the HFC Bank has also disclosed that it is in talks with two banks with the motive of merger or acquisition.

But, surprisingly the management of HFC has noted that, the two banks approached HFC after the Bank of Ghana’s announcement to find out whether they can come together as single bank.

However, the management remained silent on announcing the said two banks.

“We have started preliminary discussions with two banks that have approached us since the announcement was made and if there is progress, then you will see some kind of merger or an acquisition take place. But remember we will not just want to merge or acquire other banks but we will consider whether we have some common grounds especially when it comes to culture which will impact on our way of doing business together seamlessly,” the HFC Managing Director, Anthony Jordan have said.

Mr. Jordan confirmed that, there have been conversations within the banking industry around mergers and acquisitions among the banks; and HFC is open to offers from other banks.

HFC was one of the three banks that applied for the purchase of UT and Capital banks.

Mr Jordan affirmed that, even without any merger and acquisition or any kind of inward investments, HFC will meet the new capital.

“We intend to meet this new threshold long before the deadline in December 2018. There are strategic reasons why we will meet the deadline. Based on the discussions I have had with our majority shareholder the Republic Bank, we have decided to reinject the additional capital to meet the requirement of GH¢400 million just after our next Annual General Meeting which is set to take place in April 2018”, he said.

Notwithstanding, he downplayed calls by some other stakeholders within the financial industry for the central bank to take a second look at the increase which they deemed to be too high.

Mr. Jordan stated that: “I will not say the amount set by the regulator is too much. One has to look at it from the context of the problems and the losses some banks have run into in times past. We must look at capital requirement as a buffer, which is able to help the banks to stay in business if there are shocks within the industry.

The other thing is that the government has made it quite clear of undergoing economic transformation.They say it will come along with some big-ticket transactions which they want it to be private sector led. This means they need banks that have the muscle and financial backing to take on these transactions to help transform the Ghanaian economy,” he added.

Apparently, the First Atlantic Bank, which has also secured an inward investment to shore up its capital, is a full-service universal bank in Ghana which has been providing a wide range of banking services to corporate and retail clients for over 20 years.

Since its transformation from a merchant bank to a universal bank in 2011, the Bank has quickly become one of the more established local banks.

The Bank hopes that, the AFIG Funds’ investment will strengthen the their capital and accelerate its transition to being a market leader.

Karen Akiwumi-Tanoh, Chairman of the board of the Bank has said, “We are glad to have attracted the backing of AFIG Funds at this critical phase in our growth. We have been engaged with AFIG Funds for several years and are delighted to have gained their confidence in our business model and prospects.

“This investment will go a long way in strengthening our capital base and will better position us to continue delivering excellent service to our customers. We also expect to benefit from AFIG Funds’ experience of investing in and building banks across Africa.”

Commenting further, Papa Madiaw Ndiaye, CEO of AFIG Funds said, “We are pleased to build a partnership with a bank of this caliber, which has a diversified reach across key segments of the economy. This investment cements the longstanding relationship between both institutions.

“Our partnership with First Atlantic Bank takes place at an important stage in Ghana’s economic evolution given the new government’s plans and ambitions, particularly in terms of restoring investor confidence,” he said.

He added that as an international investor, they pride themselves on timing their investments to ideally coincide with periods of great promise in the target country.

Mr Ndiaye said they are delighted to partner with reputable institutions like First Atlantic Bank especially at a time when the Bank of Ghana has taken bold steps to strengthen the banking sector.

“We believe that First Atlantic Bank has the capacity to become one of the leading banks locally and possibly in West Africa, thanks to the quality of its board and management team, as we have known its MD/CEO, Odun Odunfa, and other members of the board and management team for many years,” he said.

-Adnan Adams Mohammed


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