Bank loans to fall due to new minimum capital requirement

The rise in the minimum paid up capital for commercial banks will further restrict lending to the private sector at least within the short to medium term. The development should be expected due to the operations of commercial banks which have limited the amount of credit offered businesses.

The caution comes on the back of the increase in banks’ minimum capital from 120 million cedis to 400 million cedis. Commenting on the issue, a Credit Consultant, Emmanuel Akrong also indicated that banks risks reducing their income streams with this plan.

In his view, the restriction in credit to businesses is also likely to adversely affect the larger economy. “At the moment, if you look at how banks are their deposits, they are putting more into government’s bonds and treasury bills than lending…so lending is not going to be low because of this new capital requirement but because of certain fundamentals which we need to fasten our seat belt about,” Mr. Akrong stated.

The latest banking sector stability report by the Bank of Ghana has shown that commercial banks have reduced their lending to businesses. The move has been necessitated by the rise in the non-performing loans of the commercial banks which stood at 7.96 billion cedis as at June 2017. For instance, loans to households for mortgage purposes declined marginally between April and June 2017. The figure dropped from 8 to 5 percent within the period.

Mr. Emmanuel Akrong however tells Citi Business News intensifying good corporate governance practices should among others reverse any adverse impact of any decision by banks to the economy.

“In the long run, I foresee a strong system in place, some of the recommendations I have made include a strong corporate governance, risk based pricing and credit and all those things are put in place, you will see a good impact on the environment in terms of high notes… there are other things that if done, no bank is going to fold it arms and say that if there are good opportunities for me to lend, I am not going to,” Mr. Akrong further asserted.

–Source: Citifm Business News

By: Pius Amihere Eduku/citibusinessnews.com/Ghana

Comments

Ghana - Corporate tax to be slashed from next year

Businesses that pay 25% of their profits in corporate taxes should expect to pay less from next year (2018). The corporate tax is expected to be reduced to twenty percent eventually. It follows what the Finance Minister; Ken Ofori Atta says is the consideration of reducing the tax in the 2018 budget. This is also part of the tax cuts which was key among the numerous promises by the New Patriotic Party (NPP) ahead of the 2016 general elections. Mr. Ken Ofori Atta maintains that diversifying tax revenue streams should prevent the overconcentration on Corporate Income Taxes (CIT). “How do you then tap enough people to contribute so that you do not need to focus on corporate income tax as a main source of revenue…We are considering reduction in a number of taxes and the Corporate Income Tax is one of them,” he explained. Upon assuming office, the NPP government has reviewed about fifteen (15) taxes . In the government’s first budget, eleven ...

How Capital Bank managers used BoG cash to establish Sovereign Bank

The management of now-defunct Capital Bank used liquidity support given by the Bank of Ghana as capital to secure a license for another collapsed bank, Sovereign Bank. The report cites an emergency board and Executive Committee meeting on October 13, 2015, which notes concern with the manner in which the Ghc 610 million liquidity support to the struggling bank was being used. The monies were moved by a member of the Board, Ato Essien into companies believed to be owned by him and others. The rest of the money was used to set up the Sovereign Bank. “Funds raised through the commercial paper issuance by MC Management Services Limited and Breitling Services were used as capitalization for the establishment of the Sovereign Bank Limited. “The placement of GHc 130 MC to Alltime Capital and GHc with Nordea Capital, was a round-tripping of the liquidity support from Bank of Ghana to set up Sovereign Bank,” the report said. The report also indicated that Dr. Mensa Otabil may h...

AICPA issues Technical Questions and Answers (TQA's) on use of inappropriate accounting standards

AICPA Technical Questions and Answers TQA Section 9160.31–.35 discusses: Whether an entity is a state or local government for purposes of determining whether it is using the appropriate set of accounting standards. How to report on the entity’s financial statements when the entity elects to follow either a different set of standards or a special-purpose framework. Section 9160, Other Reporting Issues are as follows .35 Reporting on Indian Tribe Financial Statements Prepared in Accordance With Accounting Standards as Promulgated by FASB Inquiry —an Indian tribe (or a component thereof, such as a business component functioning like a commercial entity) that meets the GAAP definition of a state or local government prepares its financial statements in accordance with accounting standards as promulgated by FASB. In such situations, may an auditor report on whether the entity’s financial statements are presented, in all material respects, in ac...

Relevant Business News from Ghana

Search This Blog