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GSE Ready To Assist Banks On Recapitalisation
Posted on: 29-Aug-2012         Source: Daily Graphic
The Ghana Stock Exchange is in a position to help banks raise additional capital to meet their minimum capital requirement as demanded by the Bank of Ghana. Charles Benoni Okine reports on the views of the exchange.

The Managing Director of the Ghana Stock Exchange (GSE), Mr Kofi Yamoah, has said that the capital market is ready to help banks that are still working to raise additional capital to meet the minimum capital requirements as demanded of them by the Bank of Ghana (BoG).

The BoG has set GH˘60 million as the minimum capital for local banks and the deadline for them to meet this demand is December 2012.

The call comes on the back of the conditional lifeline the Bank of Ghana intends to give the banks that make the attempt to raise the funds only on the premise that they initiate moves to raise the additional captial through capital market.

“The gist of the Governor’s statement is that, banks that are interested in using the capital market to raise the additional funds needed, will have the option of the deadline being extended if they can actually give proof that they have started the process” Mr Yamoah said.

To the GSE, he said “that is why we take pride in the fact that, it is important for the banks to raise additional capital by utilising the local market”.

Some of the banks have used all manner of strategies including the use of Rights Issue and Private Placement but have not been able to meet the minimum requirement as demanded by the BoG.

There have been many arguments for and against the BoG’s directive but the central bank seems unwavering by the calls for it to relax the directive.

Essentially, Mr Yamoah said, “everybody in this country is interested in bigger and stronger banks because they tend to have a greater effect as far as the growth of the economy is concerned”.

According to him, “That is why it is important that these banks should not stand by to delay the onset of raising their capital but utilise the capital market not only to raise the minimum capital but if possible, additional funds more than the minimum right from the capital market”.

As to why the banks are not responding to the call to list on the local bourse, he said some of the banks have the concept of having to own everything just as the case of many small scale enterprises in the country.

“There is also the concept of the loss of control but in reality every company listing on the market just had to shed off up to 25 per cent to the public”, he said.

Mr Yamoah said “And so when you have shed off 25 per cent you still have control because you still own 75 per cent of the company”.

He cited an example about Tullow Oil and said it’s IPO was a successfull and noted that “people buy; sometimes for diversification and for other reasons”.

Mr Yamoah said Guinness did the same time and it was “over-subscribed and they had the unfortunate situation of having to return some of those to investors so it depends on the company, the sector, the packaging and timing and so forth”.

He said there is hope for them in the capital market and asked them to explore that opportunity, adding that “they will not regret that action”.

The practce elsewhere
The move is not different in other African countries because of the argument that the increase in the minimum capital of banks will make them bigger and stronger.

For instance, according to Lusakatimes.com the Zambian government has hiked the amount of money investors must deposit with the Bank of Zambia if they want to establish a commercial bank.

The minimum capital requirement is expected to rise from K12 billion to K104 billion for local commercial banks while foreign commercial banks will pay K520 billion.

The measure is expected to help banks to mobilise additional resources to enable them to participate effectively in national economic growth and provide more money for credit.

The increase will also make the banks more resilient to economic shocks.

Zambia has up to 18 registered and operational commercial banks, according to the Bank of Zambia website.