BoG adopts ‘escalating punitive remedial’ against banks that fail to recapitalise
The Bank of Ghana is adopting escalating punitive remedial and corrective measures against any banks that do not comply with the minimum recapitalisation needed.
This is to prevent a negative Capital Adequacy Ratio, whilst closing one-third of the capital gaps per year (end-March 2024 and new end-March 2025.
According to the International Monetary Fund, the Bank of Ghana intends to lift the temporary regulatory forbearance measures it took in the wake of the Domestic Debt Exchange by 2027 and is committed to enforcing the regulatory framework regarding None Performing Loans, notably to make sure those are appropriately reported and provisioned.
It said the government-funded part of the GFSF has already started recapitalising state-owned banks with marketable government bonds.
The World Bank operation that will fund the second part of the GFSF has already been approved.
The Fund said the latter would target undercapitalized domestic banks, with funding conditional on prior capital injections by shareholders.
The World Bank is also engaging with the government to ensure that the governance of the GFSF follows best practices.
Government committed to addressing legacy issues
Also, the Fund said the government is committed to addressing legacy issues and new challenges in Special Depository Institutions (SDIs) and the asset management sector comprehensively and cost-effectively.
“Considering the important role that the rural banking system plays in financial inclusion, the authorities have pledged to prioritise addressing the long-standing undercapitalisation of this sector, as well as the DDE-related undercapitalization of ARB Apex Bank— which supports the rural banks”, the Fund added.
To ensure efficient use of government resources, the Fund pointed out that the financial support for Specialised Deposit Institutions will be conditional on the regulators’ assessment of their recapitalisation plans and prospects for future viability.