By Ernest KISSIEDU
The Bank of Ghana (BoG) must create a tier system that can cater for the needs of the country’s banking sector.
This would ensure that the gains of capitalization are fully harnessed.
This is contained in a set of recommendations made by the President of the Chartered Institute of Bankers, Ghana (CIB), Reverend Mrs. Patricia Sappor to the BoG.
According to her, BoG must not announce a uniform capital requirement for the banking sector. Rather, the central bank needs to consider a tiered recapitalisation policy that addresses the needs of the various banks.
This, she said, would help the banks to serve and specialise in other sectors of the economy, especially the small and medium enterprises (SMEs).
The CIB president added that the central bank should give the banks ample time to explore ways of meeting the new capital requirements.
“Recapitalization of banks could take place at any time, probably, every four to five years. The banks ought to take a long-term view of the economy and the banking industry and prepare for their capitalisation plans ahead of time.”
Rev. Mrs. Sappor advised banks to continue to strengthen their balance sheets over the next couple of years to enhance the pace of value creation in the interest of shareholders; so that shareholders would be ready to invest more in their respective banks.
“Lower-tiered banks must be assisted with a clear policy so that they are not left out of the banking system. A policy to stagger bank capitalisation in terms of the types of banks and their corresponding target markets is critical, timely and reasonable,” she opined.
Rev. Mrs. Sappor explained lower-tiered banks that had met the initial threshold must be allowed to serve particular sectors of the economy with innovative products and services while banks with increased capital base, that is higher-tiered banks, financed bigger projects.
She believed such an approach would help the country to have a banking sector that supported small-, medium-size and large banks that were all playing various roles in the economy.
“There is the need to sustain Ghana’s strong, reliable, competitive and healthy banking sector that forms part of the global financial system. Notwithstanding, there should be an all-inclusive banking system where banks would be segmented and empowered to support the retail market in Ghana, particularly in the financing of SMEs,” Rev. Mrs. Sappor stressed.
The CIB called on the central bank to implement the capitalisation policy by strengthening all banks to put mechanisms in place for shoring up their capital to an acceptable level.