Banking consultant, Nana Otuo Acheampong has stated that the new Banks and Specialized Deposit-Taking Institutions Bill, will consolidate the operations of microfinance companies and protect the financial regime of the country.
“The rural banks and the micro finance institutions don’t have a specific Act under regulations. This new act puts them directly under regulations so it provides a very good working definition for players in the industry. It’s a very good bill.”
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. It will also help to regulate institutions which take deposits.
Nana Otuo Acheampong believes the new law was long overdue and he stated on an Accra based radio station that he is hopeful it will strengthen licensing procedures and bring relief to the industry.
“Presently, there’s 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 the minimum capital requirement for micro-finance companies is 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 said he believes banks will continue to conform as the minimum capital requirements have not yet been changed.
The Banks and Specialized Deposit-Taking Institutions Bill
The Banks and Specialised Deposit-Taking Bill will address the supervisory and regulatory gaps. This will enable the Bank of Ghana to superintend financial service providers in the micro-finance business. It will also help to address bank resolution, ensure financial consumer protection and promote 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 the restriction on lending and investment. This 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, 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 or 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.