Commercial banks will from today start implementing a new formula for calculating their base rates, which serves as the starting-point for loan negotiations. This means banks will no longer have different ways of working out lending rates for borrowers. The new formula is based on four modules namely: cost of funds, return on equity, provision for bad debt and risk premium. Banks are also required not lend below the advertised base rates. The review comes after the Bank of Ghana established a stakeholder committee to look into the determination of bank lending-rates. The Central Bank believes this should bring about some transparency in lending rates of banks and possibly drive down rates. Managing Director of UBA Ghana, Oliver Alawuba shares in this view. “We’ve been involved from day one and we will support it. We believe it is important for the public to know how banks come about with their base rates. This will make them understand the base rates banks are declaring are done in a transparent manner to bring about confidence in the industry” he noted. For Managing Director of Barclays Bank Ghana, Benjamin Dabrah, borrowers should be the end beneficiary of this new system. “For Example when we say there is a price differential between yam on the farm and that in Accra everybody the transportation to Accra that makes the price in Accra’s high. That is what this process is bringing – clarity. That is when every bank says this is my base rate everyone understands what the components that have gone into calculating it” he also explained. Some analysts have however argued the new system is not the answer to high interest rates regime. This is because banks especially the small ones are still having difficulties in getting cheaper funds to on lend at lower rate. They also argue the new system will continue to benefit solely the big institutions.