Gh¢2 Billion is for Recapitalisation, Not Bailout - BoG Explains Support for Banks

The government has clarified that the GH¢2billion approved for five indigenous banks through the Ghana Amalgamated Trust (GAT) arrangement is to support their recapitalisation and not a bailout programme.

A statement issued by the Ministry of Finance, on Saturday, said the beneficiary banks were solvent and strong, yet incapable of raising the minimum capital requirement hence the support.

"It must be noted that, the GAT arrangement is to support solvent and strong indigenous banks to meet the new minimum capital requirement and is not a bailout programme for banks that have been resolved by the Bank of Ghana", the statement said.

The government, aided by an advisor and some pension funds, set up the GAF, a special purpose vehicle, to support the banks to meet the Bank of Ghana's (BoG) GH¢400million minimum capital that elapsed on December 31, last year.

The GH¢2.0 billion, to be used for equity investment in the banks, would be raised through a bond to be listed on the Ghana Fixed Income Market (GFIM) for liquidity purposes.

The beneficiaries are Agricultural Development Bank (ADB), National Investment Bank (NIB), OmniBank Ghana Limited / Bank Sahel Sahara Ghana (OmniBank / BSIC), Universal Merchant Bank (UMB) and Prudential Bank.

Since the arrangement was publicised, a section of the public have interpreted it as a bailout for the banks while others have accused the government of unfairness.

But the Ministry of Finance said the beneficiaries were determined on the basis of their solvency, local ownership, minimum pre-investment capitalisation of GH¢120million and an independent valuation by PricewaterhouseCoopers, a financial consultant.

The National Pensions Regulatory Authority (NPRA), Securities and Exchanges Commission (SEC) and BoG, it said had been consulted to ensure that GAT worked effectively.

"The Government and all regulators are committed to a strong and resilient financial sector and will remain vigilant to ensure that the public is protected and that confidence in all financial institutions that are licensed by the various regulators is restored", the statement said.

The initiative, it said would protect jobs, local enterprises, enhance the capacity of local banks, revive Ghanaian interests in the banking sector and ensure the sector was safe for citizens.

The banking sector clean up exercise by the BoG has reduced the number of banks in the country to 23.

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