16 banks meet capital requirement, 3 merge, 5 benefit from special vehicle, 1 exit

As of December 31, 2018, 16 universal banks have met the new minimum capital without having to undergo any merger, whereas three met the requirement through a merger process. Five indigenous banks are benefitting from the Ghana Amalgamated Trust Limited (GAT) initiative, as a single bank exited the banking sector on account of strategic reasons.

According to a release by the Bank of Ghana (BoG) on Friday, the banking sector currently has 23 universal banks in operation.

The 16 banks were Zenith Bank, Ecobank, GCB Bank, Stanbic Bank, Standard Chartered Bank, Barclays Bank, Access Bank, Consolidated Bank, Republic Bank, Fidelity Bank, UBA, Societe-Generale, GT Bank, FBN Bank, Cal Bank, and Bank of Africa.

Banks that merged are First Atlantic Merchant Bank Limited/Energy Commercial Bank, OmniBank Ghana Limited/Bank Sahel Sahara Ghana, First National Bank/GHL Bank Limited.

ADB, NIB, OmniBank/BSIC, Universal Merchant Bank, and Prudential Bank will benefit for the GAT initiative. Bank of Baroda remained the only bank that completely exited the banking sector voluntarily, although the erstwhile GN Bank is voluntarily being downgraded to a savings and loans company.

Downgrading of GN Bank

Failure of GN Bank to comply with the Minimum Capital Directive by December 31 2018, resulted in the BoG approving an application for a savings and loans company licence. The bank’s promoter Dr Kwesi Nduom claims that only foreign investors had been willing to inject the requisite new equity and the current shareholders were determined not to allow the institution become a foreign owned one.

The Bank of Ghana has also approved a transition plan submitted by GN for winding down aspects of its business which are not compatible with a savings and loans company license. These primarily are dealing in foreign exchange and membership of the cheques payments clearing house.

The implementation of the approved transitional plan which is expected to be completed by the end of June 2019 will be closely monitored by the BoG. Hence, BoG has appointed an Advisor for GN Bank pursuant to section 101 (1) of the Banks and Specialized Deposit-Taking Institutions Act of 2016 (Act 930), to advise management of GN with a view to ensuring a smooth transition to a viable savings and loans company.

Actually, GN Bank evolved out of a savings and loans company – then called First National – in the first place and indeed was eminently successful in that genre.

Resolution of Two Banks

Pursuant to Section 123 of the Banks and Specialised-Deposit-Taking Institutions Act, 2016 (Act 930), the Bank of Ghana has revoked the banking licences of Premium Bank Limited and Heritage Bank Limited

  • Premium Bank was found to be insolvent as of November 30, 2018 with a capital adequacy ratio of negative 125.26 percent;
  • Heritage Bank among other things obtained its banking licence on October 4, 2016 on the basis of capital with questionable sources. Furthermore, the bank was unable to meet the new minimum capital requirement of GHC 400 million as of December 31, 2018

The Bank of Ghana has also approved a Purchase and Assumption Agreement between the Receiver and Consolidated Bank Ghana Limited (CBG) under which the Receiver has transferred some assets and liabilities of the two banks to CBG.

All deposits (current, savings and fixed deposit accounts) of the two banks have been transferred to CBG with effect from the date of  this notice. The Government of Ghana has issued a bond in the face of GHC 1.403 billion to CBG to cover the gap between the value of the good assets and liabilities of the two banks transferred to CBG. This brings the number of banks merged into CBG to seven which inevitably presents huge challenges with regards to synthesizing their disparate corporate cultures, processes and procedures into one.

The BoG Governor, Dr. Ernest Addison said, “the just ended recapitalization exercise has repositioned the banking sector as better capitalized, liquid, stronger, and more resilient.”

“The on-going strengthening of the regulatory and supervisory framework will also ensure that the sector is well-governed, well-managed, and better supervised to restore and maintain much-needed confidence in the sector,” the Governor added.

The central bank expects that, shareholders of banks will exercise control over these institutions not for the benefit of shareholders and related and connected parties, but primarily in the interest of depositors, creditors, employees, and other stakeholders.

By Joshua W. Amlanu