Domestic Banks have been urged to merge or consolidate their positions in the industry by raising capital from the stock market. Though some of the banks, including the Agriculture Development Bank (ADB), The Trust Bank and Ghana Commercial Bank (GCB) have already met the Bank of Ghana (BOG) mandatory requirement of GH¢60 million before the December 31,2012 deadline, the rest will have to do so or face sanctions from the Central Bank. Millison K. Narh, Second Deputy Governor of BOG, speaking at the launch of the 10th anniversary celebrations of UniBank Ghana, said the issue of merger or raising capital from the stock market was necessary to enhance the competitiveness of local banks to ensure that they get a level playing field within the financial sector. "Attaining the minimum capital requirement is one thing, but its implication in terms of higher banking liquidity and a greater capacity for intermediation is another," said Mr. Narh. According to him, though the higher minimum capital base provides some support for risk absorption, the banks may be pushed to search for higher returns for share holders. This, he noted, could subsequently lead to the financing of sub-optimal projects or even speculative activities and relax credit standards. ‘‘These potential risk factors imply that the provision and adequacy of regulatory and supervisory systems must be secured to improve the environment for the conduct of banking business.’’ He noted that the Central Bank was strengthening its banking supervision functions especially in the key areas of information system audits and macro prudential analysis. In addition, he said that the Central Bank will also address gaps in the risk based supervisory framework by undertaking prudential regulation to ensure that incipient threats to banks soundness and stability were identified and addressed promptly. He also touched on the Ghanaian economy, which he noted was expanding rapidly, adding that the next challenge was to establish strong banking institutions with robust risk management systems to support economic activities. He urged banks to improve their processes, especially IT systems for effective risk management as well as train stall to equip them to manage risks effectively. He also appealed to the financial intermediaries to develop and implement internal stress testing systems to provide early warning signals regarding financial transactions, especially high value transactions related to the oil sector. Source: Daily Guide