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January 04, 2019

BOG published an update on the status of banking sector reforms in Ghana. Following the recapitalization exercise that ended on December 31, 2018, there are now twenty three universal banks operating in Ghana.

Ghana is undergoing strengthening of the regulatory and supervisory framework and the just-ended recapitalization exercise has re-positioned the banking sector as better capitalized, liquid, stronger, and more resilient. Sixteen banks (mentioned in the update) have met the new minimum paid-up capital requirement of GHC 400 million mainly retained income and fresh capital injection. Bank of Ghana approved a request for a voluntary winding up of the operations of Bank of Baroda (Ghana) Limited, effective from December 31, 2018. Bank of Baroda's winding up is the result of the Government of India's decision to rationalize the overseas operations of branches/subsidiaries of Indian public sector banks.

Pursuant to Section 123 of the Banks and Specialized-Deposit-Taking Institutions Act, 2016, BOG has revoked the banking licenses of Premium Bank Limited and Heritage Bank Limited. Premium bank had continuously breached the capital adequacy ratio (CAR) requirement since December 20178. Efforts to correct the capital inadequacy did not work and the bank reported a CAR of negative 125.26% with a capital deficit of GHC 528.33 million, implying that the bank is insolvent. Investigation revealed that the bank obtained its banking license through the use of suspicious and non-existent capital. Furthermore, the prudential returns submitted to the Bank of Ghana wee inaccurate. In addition, Heritage Bank Limited lost its license because its capital appears to have come from suspicious sources and it failed to meet the GHC 400 million capital required as of December 31, 2018, among other issues. 


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Keywords: Middle East and Africa, Ghana, Banking, Capital Adequacy, Recapitalization Exercise, Bank Licenses, Banking Reforms, BOG

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