Banking consultant, Nana Otuo Acheampong has told Citi Business News the new Banks and Specialized Deposit-Taking Institutions Bill, will consolidate the operations of microfinance companies and protect the financial regime of the country.
“If you take the rural banks and the microfinance institutions for instance, there hasn’t been any specific Act which is under regulations.
Now this one puts them directly under regulations so it provides a very good working definition for players in the industry to know that if they are dealing with any institution, they either fall under one definition or another so it’s a very good bill passed.”
Parliament on Tuesday passed the Banks and Specialized Deposit-Taking Institutions Bill in a bid to amend and consolidate the laws relating to deposit taking and to regulate institutions which carry out deposit taking business.
Though Nana Otuo Acheampong believes the new law has been long overdue, he tells Citi Business News he is hopeful it will strengthen licensing procedures and bring relief to the industry.
“It is long overdue in that, presently, we have a banking Act of 2004, amended in 2007 so this one consolidates everything and repeals both the 2004 and 2007 and replaces both with one big document,” he stated.
Banks to conform to minimum capital requirement
Presently, minimum capital requirement is 120 million cedis and 15 million cedis for universal banks and savings and loan companies respectively.
For rural banks, it currently stands at 300 thousand cedis but it is to move to 1 million cedis by 2017.
Likewise is the minimum capital requirement for microfinance companies expected to move to 2 million cedis by 2018; from the present 500 thousand cedis.
Commenting on how the new law will impact on the minimum capital requirements, Nana Otuo Acheampong tells Citi Business News he believes banks will continue to conform as the minimum capital requirements have not been changed.
The Banks and Specialized Deposit-Taking Institutions Bill
The Banks and Specialised Deposit-Taking Bill, will seek to address the supervisory and regulatory gaps to enable the Bank of Ghana superintend financial service providers in the microfinance business, address bank resolution, ensure financial consumer protection and promotion of innovation and financial inclusion.
The bill is expected to strengthen licensing procedures, consolidate supervision and cross border supervision given the growing importance of conglomerates and foreign banks.
It is also expected to address gaps and inconsistencies in the banking laws and deepen cooperation with regional counterparts to improve the regulation and supervision of foreign banks that are active in the country.
Among the highlights of the bill is to deal with restrictions on lending and investment- which prohibits a bank or specialised deposit-taking institution from granting advances, loans or credit facilities including guarantees against the security of the shares of the bank or specialised deposit-taking institution, the shares of its financial holding company, the shares of any of its subsidiaries or the shares of any of the subsidiaries of its financial holding company.
Additionally, the bill indicates that “a bank, specialised deposit-taking institution or financial holding company whose capital adequacy ratio is less than the ratio prescribed by the BoG is not to take an inter-institutional placement or receive a loan or deposit from any bank, specialised deposit-taking institution, or financial holding company in the country except with the express written approval of the Bank of Ghana”.
The Act applies to banks, specialized deposit-taking institutions, financial holding companies and affiliates of banks, specialized deposit-taking institutions and financial holding companies.