A banking consultant has cautioned Bank of Ghana against being too obsessed about the creation of megabanks through the enforcement of a minimum capital requirement of ¢400 million.

Dr Richmond Atuahene argued that it will cost more to save such banks if they are the only ones in case of a crunch.

Speaking on news analysis programme Newsfile on Joy FM/MultiTV Saturday, he told host Samson Lardy Anyenini that it is unfortunate the Central Bank decided to settle on ¢400 million as minimum capital for commercial banks.

Photo: Nana Atuahene

“The mere fact that we are going to create megabanks, it is going to create what we call too-big-to-fit which is too big to fill and that is very dangerous.

“Let me give you an example; when Citi Bank had a crisis in 2007/8 do you believe that they were bailed over $200 billion because if the bank had collapsed the whole American economy would have been in trouble,” he said.

Last year, the Bank of Ghana increased the minimum capital requirement for commercial Banks to ¢400 million from ¢120 million. Commercial banks have been given up till December this year to fully meet the new capital requirement.

With time running out for some of the banks to raise the required capital, most of the local banks will be merging compulsorily.

The raising of the minimum capital requirement will compel local and some foreign banks to merge and operate within the schemes of the newly formed organisations. For some of the banks, merging is the only option available now.

Already, there have been reports of some banks planning to merge.

Omni Bank and Sahel Sahara Bank (BISC) are in serious talks that could end up with these two institutions merging their operations.

Also, Premium, Sahel Sahara and GN banks have sealed talks that would lead to merging the three institutions. Sources say they are now waiting for BoG’s approval to give the necessary blessing to this “marriage” before it can be finalized. 

Related: Plans to merge NIB, ADB still on course – Ken Ofori-Atta

During the week, the Finance Minister Ken Ofori Atta indicated that plans to merge NIB and ADB to create a development bank have not been abandoned. 

Speaking at the Danquah Institute Forum on the Banking Sector he noted that government is committed to creating large banks to support the economy.

But Dr Richmond Atuahene said the country will have itself to blame if it creates “these elephants of megabanks and five of them decide to go [collapse].”

He believes the bailout for such banks will be far more exceedingly above done what government has currently done in the case of supporting the seven collapsed banks.

In August this year, government provided financial support through the issuance of a bond in the amount of ¢5.76 billion towards the Purchase and Assumption Agreement under which the newly created Consolidated Bank Ghana Limited. 

This was part of efforts to restore confidence and trust in our banking system, and to protect depositors and jobs after the closure of Sovereign, Beige, Royal, uniBank, and Construction Banks.

Cautioning such move, the banking consultant said, “I am just sending a caution to them [government] that inasmuch as we want to create this big one, we must also be mindful of the consequences to come would be difficult to bear."