The Chartered Institute of Bankers, Ghana (CIB), has advised the Bank of Ghana (BoG) not to announce a uniform capital requirement for the banking sector but create a tier system that can cater to the needs of the various banks.

The CIB said in order to ensure that the gains of capitalisation were fully harnessed, the BoG should consider a tiered recapitalisation policy that inures to the needs of the various banks.

That, it said, would help the banks to serve and specialise in other sectors of the economy, especially the small and medium enterprises (SMEs).

The CIB made its position known in a set of recommendations, made by its President, Reverend Mrs Patricia Sappor, to the BoG.

Ample time

The CIB added that the central bank should give the banks ample time to explore ways of meeting the new capital requirements stressing that in view of the fact that recapitalization of banks could take place at any time, probably, every four to five years, the banks ought to take a long-term view of the economy and the banking industry and prepare for their capitalisation plans ahead of time.

Banks, Rev. Mrs Sappor advised, should continue to strengthen their balance sheets over the next couple of years to enhance the pace of value creation in the interest of shareholders so that shareholders would be ready to invest more in their respective banks.

“Lower tiered banks must be assisted with a clear policy so that they are not left out of the banking system. A policy to stagger bank capitalisation in terms of the types of banks and their corresponding target markets is critical, timely and reasonable,” she posited.

Another way of looking at bank capitalisation, she added, was the segmentation of banks to allow lower tiered banks that had met the initial threshold to serve particular sectors of the economy with innovative products and services while banks with increased capital base, that is higher tiered banks, financed bigger projects.

It is the position of the CIB that such an approach would help the country to have a banking sector that supported small, medium size and large banks that were all playing various roles in the economy.

Sustaining momentum

“There is the need to sustain Ghana’s strong, reliable, competitive and healthy banking sector that forms part of the global financial system. Notwithstanding, there should be an all-inclusive banking system where banks would be segmented and empowered to support the retail market in Ghana, particularly in the financing of SMEs,” the CIB maintained.

It added that it was significant for key stakeholders in the banking sector to debate on these issues and reach a consensus as to where to place lower tiered banks within the whole recapitalisation drive.

“The institute believes that recapitalisation is a step in the right direction for the Ghanaian banking sector. What remains is the approach and methodology to be used by the regulator to achieve this objective.”

“It is our conviction that the BoG will maintain and review the capitalisation policy from time to time as has been the practice to revitalise and stabilise the banking sector,” the CIB posited.

It, therefore, called on the central bank to implement the capitalisation policy by strengthening all banks to put mechanisms in place for shoring up their capital to an acceptable level.

Beyond that point, it said, banks which would like to recapitalise to take advantage of the big ticket oil and gas sector ought to increase their capital base in relation to the size of the projects to be financed and that such a policy would go a long way to create a fair and competitive ground for all classes of banks in the country.