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Don’t Force Gov’t to Extend Banks’ Recapitalization Deadline – Prof. Quartey

The Head of the Economics Department of the University of Ghana, Professor Peter Quartey, has cautioned against attempts to stampede the President into extending the deadline for the minimum capital requirement of local banks.

He warned that such a move will not only be counterproductive, but will serve as a dangerous precedent that may come back to hurt the banking sector in the future.

Managers of domestic banks in the country met the President to request for an extension of the deadline, for achieving the GHc 400 million capital requirement.

They want the deadline extended from 2018 to 2022.

Speaking to Citi Business News on the issue, Prof. Quartey said the local banks should have petitioned the Bank of Ghana instead.

“I think the local banks or those who petition should be directed by the President to go and have a discussion with the Central Bank. We don’t want to set a precedent that any business that is not able to meet specific standards will go to the president for intervention.”

“We shouldn’t be encouraging that, otherwise the President will not have time to do anything.  Anybody at all will move to the Presidency to seek redress for anything. We don’t have a law for local banks or a law for foreign business. Our companies’ code is the same.”

Senior Minister, Yaw Osafo Maafo, and Minister for Trade and Industry, Alan John Kyerematen, have thrown their weight behind the Association of Indigenous Banks asking for an extension of the deadline for the minimum capital requirement for banks.

The Bank of Ghana has set 31st December 2018 for all banks to meet a 400 million cedis capital requirement.

But some local banks have described the time as too short a period to meet the target.

Managing Directors and Chief Executive Officers of local banks in the country have met the President to propose a new date of 2022, but it appears critical people in government are divided over the petition.

Alan, Osafo Marfo back extension

At the meeting which took place at the Jubilee House on Monday, the Association of Indigenous Banks made a strong case for an extension of the deadline for the capital requirement.

They warned that any attempt to implement the 2018 deadline would see most of the local banks fall in the hands of foreign investors, who have already made proposals to some domestic banks to take over their companies.

Key government officials in the meeting including Senior Minister, Yaw Osafo Marfo, and Minister of Trade and Industry, Alan Kyerematen, want the President to step in to give the local banks a chance to meet the deadline.

Togbe Afede XIV backs local banks

Another person at the meeting, Togbe Afede XIV, also threw his support behind the request by the local banks.

Togbe Afede XIV, who is also the President of the National House of Chiefs and Board Chairman for state-owned National Investment Bank, pleaded with the president to extend the date.

Also, they advised the government to give critical services such as Deposit Collections in key government institutions to local banks and not foreign banks.

Local banks propose timetable 

Per their petition, the local banks are pleading with the presidency to extend the deadline to December 31st, 2022.

By this, the banks have made proposals to provide 170 million cedis by the end of 2018, 220 million cedis by the end of 2019, 280 million cedis by the end of 2020, 340 million by the end of 2021, and 400 million cedis by 2022.

They warned that any attempt to implement the end of 2018 deadline, may force a takeover of all domestic banks by foreign investors who have already made proposals to the local banks.

Dr. Addison, Dr. Bawumia oppose

On the other hand, Vice President Dr. Mahamudu Bawumia and Governor of the Bank of Ghana, Dr. Ernest Addison, are two critical personalities in the meeting who opposed the decision to petition the president to extend the deadline.

The two argued that local banks can consolidate to grow their asset base if they can form an Association of Indigenous Banks.

President sets committee

After the arguments, President Akufo –Addo announced his decision to form a committee with three members from the Bank of Ghana, and three members from the Ministry of Finance with a chair from the presidency on Tuesday.

The committee is expected to submit its final report to the president on 26th May 2018.

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