…but MPC maintains policy rate at 17percent as a cautious measure
The Governor of the Bank of Ghana (BoG), Dr. Ernest Addison has disclosed that the country’s financial sector is showing signs of some turnaround as banks prepare to meet the new minimum capital requirement.
Dr. Addison made this known at the 83rd Monetary Policy Committee (MPC) press briefing.
Latest developments in banks’ balance sheet showed an increase in total assets to GHS 100.3 billion in June 2018, indicating an annual growth of 15.7 percent.
The asset growth was mainly funded by deposits which went up by 13.4 percent on a year-on-year basis.
Dr. Addison said “so far, six banks have met the new minimum capital requirement, while the rest are at different stages of compliance in accordance with their submitted capital requirement plans.”
Explaining, he noted that, at the very least, the central bank is certain of 15 banks that are likely to meet the new minimum capital requirement by December this year.
In addition to the six that have already met it, four banks are most likely to meet the requirement while the remaining five are likely to do so.
This shows that at least 19 banks will have to look to various options available to meet the minimum capital by end of this year.
Nonetheless, three banks; GN Bank, Premium bank, and Sahel Sahara bank have announced plans to merge in order to meet the minimum capital requirement.
The industry’s average Capital Adequacy Ratio (CAR) improved to 19.3 percent in June 2018 from 18.2 percent in April 2018, reflecting efforts by banks to recapitalize.
Commercial banks have till the end of December 2018 to increase their minimum operating capital to 400 million cedis.
Failure to reach this could render a bank losing the license to operate or may have its status reduced.
The central bank decided to maintain its policy rate at 17percent, as a cautious measure. This comes after inflation inched up for two consecutive months in May and June.
Credit to the private sector at the end of June 2018 grew by 5.7 percent compared with 2.4 percent at the end of March. This trend however, fell short of the 15.1 percent recorded a year earlier.
Dr. Addison noted that banks and Specialised Deposit-Taking Institutions (SDIs) are however increasing disbursement of new loans.
New advances in the banking and SDIs sectors continued to increase in the year, recording a 24.7 percent year-to-date growth in June 2018, compared with 4.2 percent growth in the same period of last year.
“Overall, the financial soundness indicators of the banking industry have improved moderately since the last MPC meeting, although pockets of weaknesses remain,” Addison said.
The Non-Performing Loans (NPLs) ratio eased slightly to 22.6 percent in June 2018 from 23.4 percent in April. Adjusting for loan loss provisioning, the NPLs ratio remained stable at 12.3 percent.
By Joshua W. Amlanu