BoG enforces banks’ Capital Requirement Directive
The Bank of Ghana has started the implementation of its new Capital Requirement Directive for banks, effective July 1, 2018.
The Capital Requirement Directive sets the requirement by which banks will calculate their level of capital as spelt out under the Banks and Specialised Deposit-taking Institutions Act.
The Bank of Ghana says its implementation of the new Capital Requirement Directive start on July 1, 2018 however; banks will be expected to start full compliance by January 1, 2019.
The directive comes six months to the deadline for meeting the new 400 million cedis minimum capital for banks.
The Capital Requirement Directive holds the Board of Directors of banks accountable for their banks ability to meet the minimum requirement set.
In the BoG’s own words, the Board is the author and driver of the bank’s corporate culture and must ensure, at all times, the bank has sufficient capital above the minimum risk based capital requirement.
As a result, the Board must work to establish a capital management framework and to provide oversight of capital for the bank consistent with the Board approved strategy and risk appetite generally.
Per the directive, banks have three options to meeting the minimum capital requirement.
This includes common equity tier 1 capital where a bank can issue ordinary shares, income surplus or retained earnings as statutory reserves which is the amount of money that a bank must hold in order to remain solvent and attain partial protection against a substantial investment loss.
In all these, the Bank of Ghana is resolute with its December 2018 deadline.