1.1 BACKGROUND OF THE STUDY
Amidst the concerns raised that Ghana has too many banks and the Ghc 60 million recapitalization requirements for indigenous banks, the Bank of Ghana is urging mergers and acquisition among the country’s banks.
This comes in response to fears that the local banks can hardly meet the recapitalization requirement without losing their indigenous identities to foreign entities. The foreign-owned banks all met the requirement last year but industry players are worried local banks are rather likely to end up in the hands of foreign entities due to the challenges of raising the capital by the end of 2012.
Governor, Kwesi Amissah Arthur, however says that as much as the Central Bank is concerned about this risk, the recapitalization is also crucial to reposition indigenous banks to take advantage of the country’s economic prospects. He said the way forward is therefore for the local banks to consider mergers and acquisitions amongst themselves.
Currently, the banking sector is one of the key growth sectors in Ghana. Beside policy reforms, the growth of the sector has been supported by improving macro-economic conditions, notably declining inflation, rising GDP growth, fiscal discipline, etc. Some of the significant reforms that have occurred since 2001 include the introduction of universal banking, the abolition of the 15% secondary reserve requirement and the increase in the minimum stated capital of banks. Recently, the Bank of Ghana further increased the minimum capital requirement of banks in Ghana from GH¢7 million to GH¢60 million. Foreign banks have been given up to the end of 2009 to raise their capital base to GH¢60 million whilst local banks have until 2010 to raise their capital to GH¢25 million and until 2012 to raise their capitalization to GH¢60 million.
The banks were expected to shore up...