GCB Asked To Shield Itself From Government


Simon DornooBanking Consultant Nana Otuo Acheampong is asking the Ghana Commercial Bank (GCB) to quickly reduce their exposure to government to avoid any unexpected shocks in the future. ? ? ? ??

The advice follows Moody?s downgrade of GCB’s deposit ratings from?stable to negative.

The rating agency was concerned that government might not be able to pay on time, monies borrowed from the bank through bonds and treasury bills.

This is also due to the recent downgrade of the country?s credit worthiness.

Moody’s also argued that looking at the bank’s exposure to government, the state might not be able to bail out GCB in times of difficulties.

Nana Otuo Acheampong who is a Lecturer at the Osei Tutu II Centre for Executive Education and Research told Joy Business the bank must also work to reduce the perception that it is a government bank.


But the Managing Director of GCB, Simon Dornoo has assured depositors their funds are safe despite downgrade of the banks’ deposit ratings by Moody?s.

Mr. Dornoo told Joy Business the bank has well diversified sources of income to sustain its operations.

Mr. Dornoo however concedes that the downgrade would affect their cost of borrowing which would affect lending rates.

The bank also maintained that this downgrade is out because it submitted itself voluntarily to Moody?s for a review.

Analysts say should other local banks submit to such reviews by rating agencies, the results may not be any different as the credit ratings of the country as a whole feeds into this.


Rating Action: Moody’s changes outlook on Ghana Commercial Bank’s B1 deposit ratings to negative from stable

Global Credit Research – 10 Dec 2013

Actions follow change in outlook on Ghana’s B1 sovereign rating to negative

Limassol, December 10, 2013 — Moody’s Investors Service has today changed to negative from stable the outlook on Ghana Commercial Bank Ltd’s B1 local-currency long-term deposit ratings and B2 foreign-currency deposit ratings. Concurrently, these deposit ratings and the E+ standalone bank financial strength rating (which maps to a b2 baseline credit assessment) were affirmed.

The rating actions follow the change in the outlook on Ghana’s B1 government bond ratings to negative on 5 December 2013 (please see “Moody’s changes outlook on Ghana’s B1 sovereign rating to negative from stable”). The rating actions reflect (1) the risk of further weakening in the government’s capacity to support the bank in case of need; and (2) Ghana Commercial Bank’s high exposure to government securities, which links the bank’s standalone creditworthiness to that of the sovereign.



Today’s rating actions reflect the risk of a further weakening in the capacity of the Ghanaian government to support Ghana Commercial Bank in case of need.

This assessment is reflected by the negative outlook on Ghana’s sovereign B1 bond rating, which is driven by (1) the government’s weak fiscal fundamentals and rising debt levels, which reflect both continued spending overruns and relatively low revenue ratios compared with rating peers, despite rapid growth; and (2) the weakening of Ghana’s external position on the back of large external imbalances and a low level of foreign-exchange reserves, which have increased the country’s susceptibility to event risk in view of the strong correlation between domestic economic activity and the global business and commodity cycles.

While Moody’s currently believes that the government’s capacity and commitment to support Ghana Commercial Bank warrants a one-notch systemic support uplift in the banks’ deposit ratings, a downgrade of the government debt rating would prompt Moody’s to reassess this one-notch rating uplift.


Moody’s notes that today’s rating action is also driven by the extensive links between Ghana Commercial Bank’s balance sheet and sovereign credit risk, owing to the banks’ high direct exposures to government securities.

According to the bank’s financial statements and Moody’s estimates, the bank’s exposure to government credit risk (i.e., investments in government securities, central bank balances and public sector loans) stood at around 70% of total assets at year-end 2012 or 9x its Tier 1 capital.

In addition, while Moody’s notes material improvements in Ghana Commercial Bank’s profitability and capitalisation metrics over the past 18-24 months, the domestic market remains the predominant focus of the bank’s operations and the operating environment is susceptible to event risk at the sovereign level.


Moody’s will likely downgrade Ghana Commercial Bank’s deposit ratings if the Ghanaian sovereign’s creditworthiness weakens further, leading to (1) a weakened capacity of the government to provide support, and/or (2) an increase in the credit risks embedded in the bank’s loan and securities portfolios.

Although upward pressure on Ghana Commercial Bank’s ratings is currently limited, improvements in the domestic operating environment and sovereign’s credit risk profile that could prompt Moody’s to change the outlook on Ghana Commercial Bank’s deposit ratings to stable.

The principal methodology used in this rating was Global Banks published in May 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.


For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices.

For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.


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