How the GH₵2bn bailout funds will be expended on the six banks

Six indigenous banks have agreed to relinquish part of their stakes to the government in return for equity investment from the state to enable them to recapitalise to GH₵400 million.

The banks agreed to the bailout package towards the end of December 2018, paving the way for the government to set in motion processes that will allow it to invest a total of GH₵2 billion in the six lenders by March 2019.

Graphic Online is reserving the names of the banks to allow for official announcement by the government and/or the Bank of Ghana (BoG) in the coming days.

It is, however, understood that the transaction is meant to rescue well governed, solvent but under-capitalised indigenous banks from losing their banking licences or at best, being downgraded to savings and loans companies for failure to comply with the central bank directive on recapitalisation.

Read also: Six banks get GH₵2bn govt bailout to meet recapitalisation deadline

Multiple sources involved in the structuring of the eleventh-hour deal told Graphic Online that under the arrangement, each bank will receive a maximum of GH₵280 million of bailout funds that will qualify as tier one capital under BoG regulations.

Banks that require more than the limit of GH₵280 million have been encouraged to merge, the sources said.

Another source said the number of beneficiary banks could increase to eight as more indigenous banks come forward for the support.

Qualifying criteria

1. Must be an indigenous bank

2. Must be well governed, solvent and meet BoG requirements on capital adequacy ratio

Nature of bailout

1. Bailout will be administered by Ghana Amalgamated Trust Limited (GAT) – a special purpose vehicle (SPV) incorporated on December 17 to invest in banks

2. GAT will source funds from capital market through bond issuance. The bond will be opened to foreign and domestic investors, with key targets being domestic pension funds

3. The bond will be issued on the assets of the six banks

4. The amount of funds a bank requires to recapitalise will determine how much of its shares will be relinquished to the government through GAT under the bailout package

5. Banks are expected to receive funds by March 2019 although BoG has qualified them as having recapitalised

6. Afterwards, a GAT consultant will appoint a director each to the board of the beneficiary bank to help oversee the interest of GAT as well as ensure prudence in the operation of the bank

Exit strategy

GAT will exit in three to five years’ time under any of the following;

1. Listing of GAT’s stakes on the Ghana Stock Exchange (GSE)

2. Existing shareholders buying GAT out

3. New shareholders buying GAT out

The BoG directive to banks to recapitalise to GH₵400 ended Monday, December 31, 2918, after resulting in the planned exit of one bank - Bank of Baroda - and two mergers that are ongoing.

It was the steepest yet had the shortest timeframe in the history of bank recapitalisations in the country.