Banks ahead of recapitalisation plans — Governor
Banks in the country are way ahead of their recapitalisation plans and are in line to restore their capitals before the 2026 deadline, Governor of the Bank of Ghana, Dr Ernest Addison, has said.
He said looking at the 2023 performance of the banks so far, it had become clear that a lot of them could even recapitalise from the profits they made in 2023.
He said there was therefore no cause for alarm, as banks continue to demonstrate their strength and resilience.
Addressing the media at the 116th Monetary Policy Committee press conference, Dr Addison said a few of the banks have already recapitalised, with most of them also in the process.
“From what we have seen from the current data, a lot of them will be able to fill the gaps from the profits they made from 2023 so the situation has improved.”
“They are doing much better than we anticipated. We have given them up to 2026 to recapitalise but they are way ahead of their plans,” he stated.
He said most of the banks have already had their annual general meetings and have asked their shareholders to raise the needed resources to recapitalise.
“So the problem has been taken care of and be rest assured that our banks are strong, resilient and we don’t foresee any major problems with regards to the recapitalisation,” he added.
He said the central bank was closely monitoring the capital restoration efforts of the banks in line with approved plans, including through support from the Ghana Financial Stability Fund.
He said it was expected that early recapitalisation and effective risk management by banks would help promote overall banking sector stability and resilience and ensure effective financial intermediation to strengthen the economic recovery efforts
Impact of DDEP
Banks in the country have relatively been stable following the financial sector clean-up which saw them increase their stated capitals to GH¢400 million.
However, the recently concluded DDEP which saw the participation of all the 23 commercial banks in the country hit hard at the industry, with 16 banks recording significant losses in 2022.
An analysis by the BoG indicated that the banks recorded losses totalling GH¢8 billion in the year under review.
The debt restructuring exercise forced the banks to set aside huge amounts of money as impairment losses and this is what has led to majority of the banks recording losses in 2022.
This also led to severe liquidity and capital challenges for the banks, with the BoG having to introduce some regulatory reliefs to keep them afloat.
As a result of the impairment in capital, banks were given a period of three years to recapitalise to pre DDEP levels, with a deadline of September 2023 to submit their plans.
The central bank in July 2023 announced that all banks whose capital have been affected by the DDEP had submitted their plans ahead of the September deadline.
Stability fund
To help address the negative effects of the DDEP, the government introduced the Financial Sector Stability Fund to help solve the liquidity and solvency challenges of the affected banks.
The World Bank has committed to support the establishment of the fund with US$250, with the government also in discussions with African Development Bank (AfDB) for another US$100 million to support the fund.
Government recently noted that it has so far raised US$750 million for the operationalisation of the fund. The fund intends to raise US$1.5 billion in total.
Commenting on the operationalisation of the fund, Dr Addison said the terms and conditions have been published on the website of the Ministry of Finance, noting that about GH¢2.5 million has already been disbursed under the fund.
Update on banks
Giving an update on the banking sector, Dr Addison said the banking sector’s performance improved as adverse spillovers from the domestic debt restructuring and macroeconomic challenges receded.
As at end 2023, he said the data shows that the banking sector remains stable, liquid and profitable.
“Profitability improved for the sector from the loss position recorded in the 2022 audited accounts, reflecting sustained increases in net interest income and fees and commissions.”
“The industry’s balance sheet was generally strong, underscored by increased assets in December 2023, funded largely by deposits. Key financial soundness indicators remained broadly positive with the Capital Adequacy Ratio (adjusted for reliefs) above the regulatory minimum, while liquidity and profitability ratios were higher in December 2023 compared to the same period last year,” he said.
He said the non-performing loan ratio, however, increased in 2023, because of general repayment challenges on the part of borrowers, reflecting the impact of general macroeconomic challenges encountered in 2022.