Hello Dr. Governor,
I dare say that whereas the GHC400 million (US$88.5 million) minimum capital requirement (MCR) you have placed on banks is not a bad policy in and of itself, it is threatening to make Ghanaians mere spectators of the mainstream financial sector instead of major participants as President Nana Addo Dankwa Akufo-Addo charged us to be in his inaugural address.

Already, only 10 out of 34 banks in Ghana are
wholly-Ghanaian-owned (indigenous); and the threat that the US$400m requirement, particularly the deadline for payment, poses to these mostly young indigenous banks, make it ridiculously un-nationalistic, unpatriotic and indeed anti-local content and anti-Ghana.

Sir, let’s do a simple comparative analysis. The minimum capital for banks with a national scope in Nigeria is $70m. For similar banks in Kenya it is $50m. But in Ghana it is $88.5m (ghc400m). Meanwhile, the Kenyan and Nigerian economies are much bigger than ours.

Let’s just use even GDP alone. Nigeria’s GDP for instance, hit a whopping US$568.5 billion in 2014. Last year it was US$405.1 billion. In 2016, Kenya recorded US$70.53 billion GDP. In 2017 it was estimated by the World Bank to have grown by an additional 4.9 per cent. Ghana’s GDP in 2016 was around US$42.7 billion. At a reported growth rate of 8.5 per cent in 2017, Ghana’s GDP hit US$46.32 billion. So what is your point Mr. Governor? What makes you think indigenous banks can raise US$88.5million as minimum capital over such a short period in an economy like ours, when the richer mother companies of the Nigerian banks here are paying much less back home? It is not a secret that the foreign banks and foreign-local partnership banks can and or will fall on their mother companies abroad. So who does the BOG expect the relatively young indigenous banks to fall on?

What I find most anti-nationalistic, Sir, is the fact that you gave the younger indigenous banks, some of whom are less than five years old, the same deadline as the rich older foreign banks to pay the amount. The young indigenous banks are asking for extra time but you insist on not giving them any grace period, why? What are you seeking to achieve?

It is standard nationalistic practice to favour local companies over foreign ones. It is done everywhere and it was even done by your predecessors when they moved MCR to $60million previously. Why are you so bent on kicking Ghanaians out of the mainstream financial sector into the fringes – why Sir, why?

Meanwhile, in Nigeria, the government policy favours only local banks, such that the few foreign banks in Nigeria pay whopping US$280 million because government policy is intended to make it difficult for them to muscle out local ones. Not a single Ghanaian bank is in Nigeria but there are seven of them here. Are the folks at BOG sleeping or what? I am not picking on Nigeria banks but I want you, Mr. Governor to see how a nationalistic central bank in Nigeria thinks and acts in favor of locals and in the national interest. Ghana is not the only country where local banks have been distressed and or collapsed. Intercontinental Bank collapsed in Nigeria, but they did not punish everybody for it.

Two of Ghana’s collapsed banks, Capital and UT Banks

Why, do you want our indigenous banks to collapse or merge so that the local stake in the finance market is reduced into insignificance? Or maybe you want the indigenous banks to also welcome foreign investors so that the entire mainstream banking sector in Ghana will be owned by foreigners like we have done with telecoms and mining? What kind of wisdom is this Mr. Governor?

What will that do to our economy? What implications does that have for the ownership of our finance sector between now and your killer deadline? What about employment for locals within the sector, local content, and the major issues of capital flight and transfer pricing. Can’t you see you are risking profits in our mainstream financial sector being shipped out in droves?

Mr. Governor, you and your men and women at BOG must pinch yourselves and wake up from your sleep fast. This is shameful.

Even in the mining, oil, energy and telecoms sectors there is a wave towards significant local content in the mainstream. Why is BOG trying to make Ghanaians spectators of our own financial sector, when the President’s charge is for us to be participants and not spectators? Why is BOG subtly pushing locals out, or at best trying hard to reduce them into oblivion and obscurity in a sector that is really the gateway to the economy, the finance sector?

Mr. Governor, why are you so fixated on these IMF and World Bank “nonsense” to the detriment of our own people? And your Deputy Governor is asking indigenous banks to roll back into savings and loans companies. Really? How do you even make such a pedestrian suggestion and keep your job at such a high office as the Deputy Central Bank Governor of a country? Each of these indigenous banks used their banking licenses to help grow some SMEs to levels that the foreign banks would hardly do. You are now suggesting that these nationalistic banks, should abandon their banking licenses, go back and become a savings and loans companies so that they will not be able to support their clients to that high level any longer. How smart is that?

UniBank also taken over by the state

Please, Mr. Governor, no matter what your reasons are, you can not hold IMF and World Bank dictates in higher esteem above the national interest. You are not paid by IMF and World Bank. We pay you, and we are not paying you to come turn us into spectators of our own finance sector. Please quit this disingenuous move before you look back ten yours from now, when the entire sector is in the hands of foreigners, and bite your fingers in shame on your retirement.

I am aware the indigenous banks are willing to pay your ridiculously high GHC400m; all they are asking for is time to raise the money locally since they can not fall on foreign aid like their other counterparts. If you have an ounce of nationalism left in you, please use it and give them some breathing space. When you do, you would be saving Ghanaians from becoming slaves to our own financial sector.

Participatantly Yours.

Samuel Nii Narku Dowuona




9 COMMENTS

  1. this article is very much on point . It is very unpatriotic to seek to choke your own indigenous businesses and deepen foreign invasion of our capital market . This MCR decision isn’t bad per se but the timeline is simply cruel to our indigenous banks so the governor and this government must soften their insistence on this issue and rather stimulate our indigenous banks to grow to international levels . In fact there will be less capital flight when our own people dominate the money market . This government must wisen up before it’s too late

  2. I find it unfortunate that Ghanaians would treat Ghana’s Banking Regulator with such censuring as a result of the Regulator seeking to perform its Regulatory Function.
    If the Business of Banking is based on TRUST and some Ghanaians cannot trust the Banking Regulator, at least the Banks should trust the Regulator so Customers will be encouraged to entrust their monies into the hands of Banks.
    We need to uphold this element of TRUST CUSTOMERS HAVE REPOSED in Ghana’s Banking Industry. After all, until the Regulator slammed its hammer on those 2 Banks, did anybody expect what happened to have happened when it did?
    Should we not be mindful of what signals we are sending to the International Financial Industry?
    Should we not be mindful of what forms of discussion to make on this matter, even to the extent of engaging the person of the Governor, rather than the Regulator?

    I recall reading about comparison with Nigeria and Kenya.
    Is Nigeria changing their Capital Requirement to USD70M as Ghana is seeking to change to USD88M, or living with USD70M?
    Is Kenya also changing to USD50M like Ghana seeks to raise to USD88M, or living with USD50M?
    I suppose there certainly must be a rationale for the GHs400M Regulatory requirement to make the Capital Adequacy Ratio (CAR) equal to 10% for Regulatory Compliance!
    Shouldn’t we give the Regulator the benefit of the doubt that for a 10% CAR requiring GHs400M as an aggregate of all tiers of Capital, their denominator of Risk Weighted Assets should be GHs4,000,000,000.00 or getting close to GHs4,000,000,000.00 or likely to hit GHs4,000,000,000.00 by 31 December 2018?

    Total Capital
    10% = ————————–
    Risk Weighted Assets

    Risk Weighted Assets * 10% = Total Capital

    GHs4,000,000,000.00 * 10% = GHs400,000,000.00

    Shouldn’t we be seeking to look into the Regulatory requirement with the same eye the Regulator is doing?
    The Regulator didn’t just issue a directive to Banks to increase. The directive came with an opportunities as follows:
    Directive Opportunity
    1. Fresh Capital Injection (FCI) An Investment opportunity to both Local and Foreign Investors
    2. Transfer form Income Surplus A window of 2 Financial years, i.e., 2017 and 2018
    3. Fresh Capital Injection and Transfer form Income Surplus Is it beyond the Banks to make profits in 2017 and 2018 to boost Income Surplus and to obtain some FCI to meet the Regulatory requirement of GHs400,000,000.00?

    Shouldn’t Ghanaian Banks have put up strategies to project Profit levels for 2017 and 2018 to determine the gap and what maximum capacity to raise through FCI?
    Consider a Bank with Current Total Capital of GHs150M in the table below.

    Millions Millions
    New Minimum Capital MC 400.00
    Current Total Capital Cap 150.00
    Add: Projected Income Surplus @ 2017 A 145.50
    Add: Projected Profits @ 2018 B 17.50
    Less: Total Capital TC 212.50
    NET SHORTFALL (TC-MC) (87.00)

    Such a Bank would have a net shortfall of GHs87.M as FCI to make by 31st December, 2018 and I suppose that, this Bank would have had the opportunity of mobilizing a minimum of GHs87M in 15 months from September, 2017, all other things being equal!
    This Bank should be then able to engage the Regulator to justify how and how long the said Bank would require to raise a minimum of GHs87M, as it were!!!!!.
    Shouldn’t we rather seek to engage the Regulator to address this matter without subjecting same to this type of discussions?
    I can imagine what considerations\decisions Correspondent Banks have been making about Ghana’s Banking Industry!
    Let us deal with this matter with circumspection because the International Financial Services Industry is watching Ghana.

  3. I presented some tables which didn’t show as tables, so I have attempted to present same as follows:
    The first formula under CAR should read as below:
    Total Capital
    10% = ————————–
    Risk Weighted Assets

    The real table should under the line reading “Directive Opportunity” should have been as shown below:
    Directive Opportunity
    1. Fresh Capital Injection (FCI) An Investment opportunity to both Local and Foreign Investors
    2. Transfer form Income Surplus A window of 2 Financial years, i.e., 2017 and 2018
    3. Fresh Capital Injection and
    Transfer form Income Surplus Is it beyond the Banks to make profits in 2017 and 2018 to boost
    Income Surplus and to obtain some FCI to meet the Regulatory
    requirement of GHs400,000,000.00?

    Thanks.

    The bit under “Millions Millions should also read as follows:

    Millions Millions
    New Minimum Capital (MC) 400.00
    Current Total Capital Cap 150.00
    Add: Projected Income Surplus @ 2017 (A) 145.50
    Add: Projected Profits @ 2018 (B) 17.50
    Less: Total Capital (TC) 212.50
    NET SHORTFALL (TC-MC) (87.00)