Shareholders, not regulatory or policy instruments, will determine whether the banking industry will see mergers and acquisitions, Alhassan Andani, President of the Ghana Association of Bankers (GAB), has said.

The Central Bank announced a more than 200percent increment in the bank’s minimum capital requirements from GH¢120million to GH¢400million with a December, 2018 deadline.

“The issue is that if they raise the bar and you cannot meet it, you can reach out to each other but it cannot be legislated or driven by regulatory instruments. It is the shareholders who must determine whether they have the capacity or not.

Then they [shareholders] can reach out to another bank that has a similar profile and risk appetite as they have then they can start a conversation. But that is entirely a shareholder conversation. The BoG announcement is only an indication to the market but mergers and acquisitions cannot be directed by regulation,” he told the B&FT in an interview.

Analysts have opined that the economy has too many banks and need to trim the number, which currently stands at 34, to less than 20 with higher capitalisation which will lead to bigger banks that can support aggressive economic growth.

The Finance Minister, Mr. Ken Ofori-Atta a couple of weeks ago, noted that the economy needs five strong and well capitalised local banks so that the banking system will be well represented.

“Without a robust financial system, certainly, the issues of industrialisation and Ghana as a hub when it comes to finance become problematic, and our challenge then is: how do we manage the high number of banks that we have so that we can become the magnet we want to become?” Mr. Ofori-Atta asked.

“Lending rates should be in single digit and this will allow the private sector to come to you to borrow and that seems to me to be a challenge as we look at the number of banks and what we have to do to strengthen them,” he added.

In line with streamlining the industry, the central bank then sanctioned the purchase and assumption of UT and Capital banks, which have been facing challenges for two years, by GCB Bank, which is already the largest local bank.

Bankers respect BoG decision

Mr. Andani added that the industry respects the decision of the Central Bank and managers must now make a case to shareholders on why they need more capital for their operations.

“The Central Bank certainly knows the kind of risk spread of the industry and how capital should be allocated. We need to go back and re-tweak our business cases and for those of us who have been in business for a long time will look at our past performances and see how to justify to our shareholders what we will do with the higher capital,” he said.