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Your Excellency,



Your Excellency, kindly permit us, the Association of Indigenous Universal Banks, to take
some of your precious time to present this petition to you for your consideration.

We deem it our responsibility to bring to the attention of Your Excellency, the President of the
Republic of Ghana, a matter of concern to us which has the potential of affecting the smooth
functioning of the economy and also cede control of the banking industry in Ghana largely to

It has become necessary for us to solicit Your Excellency’s intervention in the implementation
of the recently announced increase in the minimum paid-up capital of universal banks from
GH¢120million to GH¢400million by the Governor of the Central Bank for reasons discussed

Your Excellency, private participation by indigenous entrepreneurs in the ownership of banks

is a recent development which started around the early 1990’s. Prior to this period,
ownership of banks in Ghana was dominated by the State and foreign banks. The State
banks at the time were Ghana Commercial Bank, Agricultural Development Bank, National
Investment Bank, Social Security Bank (Now Societe General Ghana Limited), National
Savings and Credit Bank which was taken over by Social Security Bank, Bank for Housing &
Construction, now defunct, and Cooperative Bank, also defunct. The foreign banks included

Barclays Bank, Standard Chartered Bank and Bank for Credit & Commerce formerly Premier
Bank also defunct.

Currently, there are 34 universal banks in Ghana; 18 of which have foreign majority share
ownership while 16 of them have local majority share ownership (6 of which were licensed
within the last 3 years). Out of the 18 foreign majority owned banks 7 are Nigerian banks.

Your Excellency, the advent of indigenous banks in the banking industry has been hailed by
the general public as a positive intervention for growing the informal sector of the economy.
The establishment of relatively smaller sized and purely local universal banks has enabled
credit to reach the informal sector, particularly indigenous micro and small enterprises,
cottage industries, agri-businesses, small scale manufacturers, petty traders and crop and
livestock farmers which the bigger banks had and continue to marginalize because of the
perceived high risk of the sector. It is important to state that this is the sector which requires
consistent nurturing and support to grow to become the big businesses of tomorrow that can
employ our growing unemployed youth and also create wealth for our nation.


Your Excellency, it is worth noting that Bank of Ghana has raised the minimum paid-up
capital for banks five times since 2001 as summarized below:

Date of Period
Announcement Minimum Capital Granted for Compliance
of the new Required (GH¢) Compliance Deadline
capital required
New banks Existing Banks Bank of Ghana advised
were to were not given existing banks with
January 2001
1 Ghanaian banks- 2.5m comply any specific inadequate capital to
Foreign banks- 5.0m immediately deadline. increase their capital.
Development banks- 7m

2 3 years 10 31st December All banks were to comply

February 2003 7 million
months 2006 by 31st Dec. 2006
Banks with foreign
majority share ownership
were given 1year 10
3 4years 31st December months to comply
February 2008 60 million
10months 2012 whereas banks with local
majority share ownership
were given 4 years 10
months to fully comply.
Bank of Ghana rather
New banks admonished existing
No deadline
4 were to banks to increase their
December 2013 120 million was set for
comply capital in line with their
existing banks
immediately business strategies and
risk profiles.
New banks will be
required to comply
immediately. The time
5 1 year, 3 31st December
September 2017 400 million for existing banks is
months 2018
considered too short,
especially for indigenous

Your Excellency, as shown in the table above, in January 2001, Bank of Ghana announced a
new minimum capital requirement for banks tiered as follows;

• Ghanaian banks GH¢2.5million (then ¢25 billion);

• Foreign banks GH¢5.0million (then ¢50 billion); and
• Development banks GH¢7million (then ¢70 billion).

New entrants into the banking industry were required to comply immediately whilst existing
banks were not given any specific deadline but were advised to increase their capital to the
new levels.

In February 2003, the Bank of Ghana again raised the minimum paid-up capital to
GH¢7million for all banks and introduced the concept of Universal Banking. The banks were
given 3 years 10 months to comply by 31st December 2006.

In February 2008, the Bank of Ghana announced another increase in the minimum paid-up
capital of universal banks from GH¢7.0 million to GH¢60 million. All universal banks were
required to comply by 31st December 2009. The indigenous Banks, realizing that the increase
was too steep and the time period to comply with the directive also too short, decided to
petition the President of the Republic of Ghana to intervene for the local banks to be granted
an extended period of time to meet the GH¢60 million requirement. As a result of the
President’s intervention, the Governor of the Bank of Ghana reviewed the position and
introduced a two track method for compliance. Banks with foreign majority share ownership
were given approximately two years up to 31st December 2009 to meet the new capital whilst
banks with local majority share ownership were given approximately five years to attain the
new minimum capital in two phases; GH¢25 million by 31st December 2010 and GH¢60
million by 31st December 2012. Your Excellency, we attach hereto, a copy of Bank of
Ghana’s directive as annex 1.

In December 2013, the Bank of Ghana again raised the minimum paid-up capital to GH¢120
million for new entrants into the banking Industry. Bank of Ghana did not set any deadline for
existing banks to comply with the new capital requirement. However, they admonished
existing banks to raise their capital in line with their business strategy and risk profile.

During the period between December 2013 and 2016, there were clear indications on the
market that Bank of Ghana would announce a new minimum capital for universal banks and
the figure that was widely speculated among the banking industry players was around
GH¢260million. This would have meant an increase of 117% over the existing level of
GH¢120 million. Many banks therefore started notifying their shareholders about the possible
increase of the minimum capital to around GH¢260million. This expected increase, at the

time, was considered quite steep by most industry players. However, the increase was not
announced until September 2017.

Your Excellency, the new increase from the 2013 level of GH¢120million to GH¢400million
announced by Bank of Ghana in September 2017 represents an increase of 233% which is
clearly, too steep. Furthermore, the situation is aggravated by the short period of 1year 3
months given to banks to comply with this requirement.

Your Excellency, our Association supports Bank of Ghana’s policy of increasing the capital
levels from time to time to off-set the deterioration of banks’ capital due to exchange rate
depreciation over the period and the recent non-performing loan write-offs as a measure to
further develop, strengthen and modernize the financial sector in support of the government’s
economic vision and transformational agenda. Nevertheless, the quantum of the increase
should not overburden the indigenous banks and the time frame for attainment should always
be accommodating.

Your Excellency, permit us to bring to your attention recent developments in the market since
the compulsory take-over of two indigenous banks; UT Bank and Capital Bank in August
2017 by GCB Bank Limited and the subsequent announcement of a new minimum capital
requirement in September 2017. These two events have led to a growing speculation among
the general public about the future of indigenous banks. This speculation has significantly
affected the ability of some indigenous banks to retain existing deposits and also acquire new
deposits. Some of the banks have even started experiencing declines in their deposits
because depositors have become more averse to dealing with these banks.

Your Excellency, unfortunately indigenous universal banks will not be in a position to

raise the additional capital within such a short period without being taken over by
foreign investors who are already on the market seeking take-over opportunities.


Mergers and Acquisitions

Your Excellency, it’s been argued by policy makers that banks should consider merging in
order to achieve the new capital level. We concede that a merger as a financial tool could be
a method of achieving the new capital. However, given the levels of capital of the indigenous
banks, 2 or 3 indigenous banks will have to merge to attain the new minimum capital of
GH¢400 million. Even if a merger is a possible solution, it is unlikely that a successful merger
of 2 or 3 banks can be achieved within a relatively short period of one year considering the
due diligence activities that have to be undertaken before mergers are consummated.

Furthermore, the merger option could have very serious negative consequences on the
economy. Since the Banks to be merged are engaged in similar activities, have similar
organizational structures with proximity of branch locations, the merged entity would have to
reorganize its operations to eliminate duplication of roles and functions. This rationalization
will lead to a close down of some branches and staff lay-offs. We estimate that each of such
mergers could lead to a loss of employment of between 500 and 1000 persons. Such lay-offs
could undermine the government’s efforts to create employment. The social costs could
therefore outweigh the potential benefits of the merger.

Moreover, an involuntary merger of the kind we envisage could kill local entrepreneurial
initiative. Furthermore, it is also known that a merger as a financial tool does not always
produce the desired results due to incompatibility of partners which could occur after the

Public Flotation

Your Excellency, the second option is for Banks to raise the additional capital from Ghana’s
capital market by a public flotation. Currently, the average capital of each indigenous bank is
about GH¢120million leaving a gap of about GH¢280million to be raised by each bank. Even
if 10 out of the 16 indigenous banks decide to go to the capital market, their requirement will
be a total of GH¢2.8billion.

The Association’s preliminary evaluation of Ghana’s capital market indicates that it will not be
easy for even the 10 indigenous banks to raise an estimated amount of GH¢2.8billion in
equity from the market at the same time within this short period of 1 year. This situation could
inundate the market and reduce the success rate of the flotations.

Furthermore, the situation would be worsened if the existing publicly listed banks such as
GCB Bank Limited, ADB Bank Limited, Cal Bank Limited, Standard Chartered Bank Ghana
Limited and HFC Bank Ghana Limited decide to raise the additional capital from the Ghana
capital market to enable them meet the new minimum capital.

Your Excellency, there is therefore the need to extend the compliance date to ensure the
success of any such flotations.

Private Placement with Ghanaian Investors

Your Excellency, the third option is for the indigenous banks to raise the additional capital by
private placement with Ghanaian investors. Already some of these investors are the
shareholders of the indigenous banks. The issues with this option are similar to that of the
public flotation. The estimated GH¢2.8billion to be raised by about 10 indigenous banks is so
huge that it cannot be achieved within the short period of 1 year. Furthermore, prospective
investors will always require periods of exclusivity for conducting their due diligence and
during such periods, a bank cannot deal with any other potential investor. Meanwhile the
outcome of due diligence exercises is not guaranteed hence there is a possibility that a bank
may not have made significant progress by the time the deadline elapses. In the situation
where the due diligence exercise does not yield the desired results, the bank will not have
sufficient time to start and finish any new process within the stipulated time frame.

Foreign Equity

Your Excellency, the fourth option is to turn to foreign private investors to raise the additional
capital. However, given the existing capital levels of the indigenous banks which are mostly
less than 50% of the required new minimum capital of GH¢400 million and with the severe
time constraints, this option will lead to foreigners acquiring majority shares and assuming
control of the indigenous banks.

Your Excellency, this fourth option, which could be the last resort for indigenous banks, will
not augur well for the Government’s local content policy.


Your Excellency, it is being suggested also that smaller banks should merge to form bigger
entities in order to have capacity to finance big ticket transactions. In as much as big capital
may be good and allows banks to engage in big ticket transactions, it does not necessarily
remove the risk of failure of big banks. The risks in such transactions can best be diversified
by syndicating the deals with a few banks. Moreso, not all banks have a mission and
therefore the expertise to do big ticket deals. All over the world, particularly in advanced
countries, there are small banks and also big banks playing their unique roles and exploiting
their niche markets. Banks therefore do not necessarily have to be big to survive. The
smaller banks in Ghana which are predominantly indigenous have a role to play and
government policy should always ensure that they survive.

We also further concede that normally big capital is expected to provide a buffer to absorb
losses, therefore on this point, the Association agrees with Policy Makers. However as
previously mentioned, big capital does not necessarily guarantee survival of banks,
particularly if the safety buffer that it is supposed to provide is fully used up through financing
activities. Even though we consider the increase from GH¢120million to GH¢400million very
steep the Association is not requesting for a downward review in the new minimum capital.
Our primary concern is the rather short period given for compliance. This is a departure from
the previous times when banks were given adequate time to comply with new minimum
capital requirements as stated earlier.


Your Excellency, through similar capital mobilization in the past to comply with new capital
levels, 3 indigenous banks namely; Amalgamated Bank, First Atlantic Merchant Bank and
HFC Bank were taken over by foreigners.

Your Excellency, recent developments in the banking sector clearly indicate that the
government needs to support the indigenous banks which hold the key to the future of the
economy of Ghana. For instance, within the last 10 years, Standard Chartered Bank Ghana

Limited has closed down most of its branches outside Accra including its branch in Sunyani,
a regional capital located in a major cocoa growing region. Barclays Bank of Ghana Limited
has also closed many of its branches outside Accra. Social Security Bank, a former
indigenous bank that was heavily involved in cocoa financing and therefore located some of
its branches in cocoa growing areas in the western region, was taken over by Societe
General Ghana Limited which within a short time has closed most of the branches in the
cocoa growing areas in the western region and sold them to HFC bank then an indigenous
bank. Currently, the indigenous universal banks are the dominant credit providers to the
informal sector of the economy and must therefore be protected.

Your Excellency, from the foregoing, your intervention is urgently needed to save the
indigenous banks from possible total obliteration.


Your Excellency, Bank of Ghana’s past directives on new capital requirements had always
given adequate time of an average of 4 years for compliance by banks. The last directive in
2008 gave local banks 4 years and 10 months after the intervention by His Excellency, the
then President of the Republic of Ghana in response to a petition by the Association of
Indigenous Banks.

The current increase in the minimum capital from GH¢120million to GH¢400million

announced by Bank of Ghana in September 2017, giving the banks 1 year and 3 months to
comply, is too short and if the duration is not extended sufficiently, its attainment by the
indigenous banks could lead to a wholesale of the indigenous banks to foreigners. Such a
situation will put the control of the banking industry in the hands of foreigners which could
have future negative consequences on the economy particularly in the provision of credit to
the agricultural sector and the informal sector in general.

Your Excellency, as already indicated, the current average stated capital of each indigenous
bank is about GH¢120million; each bank is therefore required to raise an additional equity
capital of about GH¢280million. This can be a herculean task to achieve within 1 year.

In the light of the difficulties and the demerits we have raised on each of the available
options for raising the additional capital in this petition, we humbly appeal to your Excellency

to extend the compliance period to 5 years structured to attain the new minimum capital of
GH¢400million as follows:


31ST December 2018 GH¢170million

31st December 2019 GH¢220million

31st December 2020 GH¢280million

31st December 2021 GH¢340million

31st December 2022 GH¢400million

Your Excellency, the proposed structure of attainment will enable Ghanaian shareholders
both existing and new to make yearly contributions to build the capital of these indigenous
banks in a smooth and steady manner with little or no contribution from foreign investors
thereby retaining control of the banks in the hands of Ghanaians.

Your Excellency, whilst we are convinced about your willingness to support us with this plea,
we will like to bring your attention to the urgency of the timing of the communication of your
decision in this matter. This is because the stability of indigenous banks will be significantly
improved if the public announcement of your decision is made in good time.

Your Excellency, we trust that you would show your usual magnanimity and consider the
petition favorably to help us build Ghana together.

Please accept the assurances of our highest esteem.

We remain,


No. Bank Name Authorized Representative Signature