Local banks reduce staff to meet GH¢400m minimum capital

With the clock ticking towards the deadline for universal banks in the country to increase their minimum capital to GHc400 million by the close of the year, many indigenous banks are working out modalities to drastically reduce their staff strength.

More than 3,000 professionals in the banking sector are expected to be affected in a move intended to, among other things, reduce the banks’ operational cost as they consider many options, including mergers and acquisitions, to raise the required minimum capital and beat the deadline.

The directive to the banks to raise their minimum capital is expected to further worsen the unemployment situation in the country.

Already, following the takeover of two universal banks by the Bank of Ghana (BoG) through the GCB Bank, approximately 1,000 professionals in the banking sector have lost their jobs.

READ ALSO: It’s too late for banks to use IPOs for Gh₵400 million minimum capital

Sources within the 10 indigenous banks which are most likely to suffer under the new directive told the Daily Graphic on condition of anonymity that “we presently have no choice but do what we can to save our banks from being taken for cheap”.

They claimed that the intention of the BoG was to solve a problem but it was likely to create a bigger challenge for the economy, which was already struggling to absorb the millions of idle hands looking everywhere to find jobs.

They said with the Ghana Stock Exchange (GSE) shutting the window on any new listings on the local burse for the remaining months of the year, the only option left was for the banks which would not be able to raise the minimum capital to allow themselves to be absorbed by the international banks which were standing by for that option.

READ ALSO: Bank of Ghana stands by recapitalisation deadline

State of uncertainty

The sources indicated that the posture of the BoG had reduced the confidence of the public in many indigenous banks because of the fear of “the unknown”.

According to them, existing customers of the banks were fast reducing their deposits, while attempts by marketing teams of the banks to find new ones to save with them had become extremely difficult.

They said planned branch expansion projects to under-served areas of the country had been put on hold, a situation which was going to deny indigenes of those areas with the right qualifications the opportunity to gain employment in the banking sector.

National influence

“There is no denying the fact that strong indigenous financial institutions are fundamental to the development of every economy,” they said.

“It is believed that local banks have their existence linked closely to the growth of national economies, particularly with our private sector controlled by small-scale industries, and it will be pretentious to say they will not be affected if the local banks fail to meet the new minimum capital requirement.

READ ALSO: Local banks catch ‘merger phobia’ as recapitalisation deadline approaches

“The indigenous banks are very much unlike the foreign-owned banks that make profit and regularly repatriate it back to their owners and shareholders abroad. With the indigenous banks stretching for the difference of GHc280 million to meet the new capital requirement, the situation plays easily into the hands of the foreign banks and reduces further the shrinking influence of indigenous banks and their market share, which is already seen to be around 20 per cent, compared to the situation in South Africa, Senegal, Cote d’Ivoire and Nigeria,” they added.

According to them, “in those countries, indigenous banks have a larger control of the financial sector, ranging from 63 per cent in Senegal, 76 per cent in South Africa, 80 per cent in Nigeria to 100 per cent in Cote d’Ivoire.