• The others train you to forecast, but our scholars train you to forecast accurately in the capital market

The substantive change in the Banks Capital structure from Ghȼ120 million to Ghȼ400million about 333.3% increase, as a process to be effected on September 11, 2017 by the Bank of Ghana to all Banks operating in Ghana. Issued with an ultimatum period of three months to raise such capital as a minimum capital requirement according to the press release by the public media agencies, is embraced with a mix feeling by the industry especially the indigenous banks as a private sector development advocator

Even though such an action carries a positive intention for the economy of Ghana, it equally establish a jungle platform to determine the survival for the fittest among the industry players especially the indigenous private Banks.

The first question to ask is, why the need of such capitalization around this time and at such rate level of 333.3%?

According to D. K. Mensah (2017), the developed world now talks about Basel(IV) but Ghana is yet to adopt the Basel (II) & (III) with the expected implementation in the year of 2018.
Basel (II) is established from the Basel accord, put forth by the Basel Committee on Bank Supervision, which regulate finance and banking internationally. The Basel (II) attempt to integrate the Basel Capital standards with national regulations, by setting the minimum capital requirements of Financial Institutions with the goal of ensuring capital adequacy of Banks.

A. The Relevancy in the adoption and application of Basel (II) & (III) by BoG

1.Ability to improve the risk sensitivity of the activities in the financial institution in developing economy like Ghana
2.To help the Banks contribute to the growth of the economy, with the capacity to invest into real sectors of the economy with good underwriting practices. Furthermore with believe that, this minimum capital hold a buffer level that reflects any inherent risks in their portfolio.

B. Effect of Basel (II) & (III) applications on the Local Commercial Banks

According to PWC (August, 2017) Report on the survey of Banking Industry of Ghana, about 47% of the Banks were not prepared for such risk-based capital regime. About 41% had not yet communicated this transition plan to their stakeholders as the highest respondents in that category. Interestingly the foreign Banks were not having much problem because their confidence and reliance is upon their headquarters intervention and sister Banks found in foreign Lands to step in when the time is due in terms of capital and personnel needed in the full application of the Basel (II) & (III).

A successful application of this accord goes beyond the minimum capital requirement for the banks, which is about to be enforced, but require a reliable database to run sophisticated risk assessment models, which need supervisors whose capacity is built to assess, validate and monitor the use of sophisticated models, competitiveness of Banks and access to credit by small and medium size enterprise which hold the highest transaction quadrant of the Banking ecosystem of Ghana.

Conclusion & Recommendation

Due to the low appealing rate of local Banks to attract foreign investment as a consolidation in comparable to their International counterpart, there is the possibility of most of the private domestic owned banks to be consumed by foreign Banks with the exception of possible existence of government Banks taking the center stage of domestic banking versus the International Banks as in the case of Ghana Commercial Bank (GCB)

1.The consequence is causing labour redundancy in the Banking sector
2.Possibility of rise of liquidation in the Banking industry among the local private Banks, if they find no reason to quickly merge as a new formidable force
3.The possibility of some of the Local Banks  reducing to the status of Savings & Loans companies which in my opinion are reasonable option available, if they are to play by the rules

The last condition which lack empirical evidence yet in my opinion stands out as a logical forecast based on other fractional reports reviewed, indicate a smart craft of an intelligent hand to masterly control the capital market of Ghana solitary to void of any opposing force in the private indigenous hands that has the future strength to grow wings politically. A scientific observation project that, anytime the capital market of Ghana is subjected to market efficiency hypothetical test developed by Fama Eugene, it will fail to pass the test, because it ride on political wings than a free market economic base system.

Therefore my advocacy is to humbly request that the regulator measure and evaluate the impact factor carefully both in medium and long term in comparative analysis to the cost/damage factor this action stands to cause economically.

Source: This article is written by  Dr. Emmanuel Tweneboah Senzu, a Professor of Frederic Bastiat Institute of Finance & Investment Banking at Cape Coast Technical University Ghana and Published by Maxwell Arthur from the office of Bastiat Institute.


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