[ 2016-08-15 ]

BOG must consider economic capital requirement for banks – Nana Otuo
Banking Consultant, Nana Otuo Acheampong has
called on the Bank of Ghana to consider an
economic capital requirement for universal
commercial banks in Ghana rather than the
regulatory minimum capital requirement.

The economic capital requirement, according to
Nana Otuo Acheampong, will allow the banks the
choice to either remain a small bank or grow to
become a bigger bank which allows them opportunity
to participate in multimillion dollar transactions
like the cocoa syndicated loan and the Ports
expansion projects which require huge funding
considering their capital base.

In an interview with Citi Business News, Nana Otuo
Acheampong said the economic capital requirement
will bring about the much talked about
consolidation within the banking industry.

“Presently, we have two types of minimum capital
requirements;the regulatory capital requirement
and the internal process of raising minimum
capital requirement. So the debate we want to
raise is that we should now rather implement the
economic capital requirement system rather than
the regulatory capital requirement.”

He further argued, “There should be a choice in
that if somebody wants to remain a small bank,
then it should be allowed to remain as such but if
the bank’s economic activity is so high that it
requires bigger capital, then the argument that is
being advanced in the industry comes in handy.”

In addition, the Banking Consultant maintained
that adopting the economic capital requirement can
help the consolidation process where the bigger
banks will have more capital and would be able to
take part in the big ticketing transaction.

The central bank has given indication it will in
yearly intervals, increase the minimum capital
requirement of commercial banks operating in
Ghana.

Currently the minimum capital requirement of
commercial banks is 120 million cedis and this is
expected to go up to over 200 million cedis.

Economic capital (EC) is the amount of risk
capital that a bank estimates in order to remain
solvent at a given confidence level and time
horizon, while the Regulatory capital (RC), on the
other hand, reflects the amount of capital that a
bank needs, given regulatory guidance and rules.

Source - citifmonline.com

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