A former Minister of State at the Finance and Economic Planning Ministry, Dr. Anthony Akoto-Osei says there are too many banks in Ghana.
According to Dr. Akoto-Osei, who is also a member of parliament for the Kwadaso Constituency, most of these banks are small and inefficient.
Speaking at a World Bank forum in Accra, he said the country needs few banks that can be able to lend and compete among each other.
“At the moment we have too many banks in country…twenty-six for this country, I think it is too much”, the Dr. Akoto-Osei said.
He added, “right now some of the smaller banks are finding it difficult to get capitalization.”
We need to look at ways of finding solutions to reduce them, he said.
An economist and investment banking consultant, Dr. Sam Mensah at the same meeting agreed to Dr. Akoto-Osei’s assertion.
According to Dr. Mensah, smaller banks need to provide the same services that the big banks offer which is a bit expensive.
“It cost you so much money to put in place your Automated Teller Machine (ATM) systems and spread it all over a small number of customers… need to have your electronic cards forms and spread it for a small number of customers as well”, he said.
Aside all these, the banks have to pay salaries to their workforce. “So you don’t have economics of scale”, he said.
He cited Canada as a country which has only five banks operating in all corners of the streets.
“The whole of Canada has five banks with a lending spread of 2 to 3% but there is a branch of a bank in every corner.”
He suggested that the central bank should raise the capital requirement of the banks and must not give them enough time to raise the amount.
“The way to push it is to raise the capital requirement of the banks and don’t give the banks enough time to raise the amount”, Dr. Mensah said.
According to him the country made a great mistake about three years ago when Dr Paul Acquah, the immediate past Governor of the Bank of Ghana, decided to raise the capital requirement from GH¢7 million to GH¢60 million and some banks complained. The central bank was compelled to reduce the requirement as a result.
Adding his voice to the suggestions made, Professor Cletus Dordonu, an economist, said when Dr. Paul Acquah announced the minimum base capital requirement for banks, he was happy since it was one of the ways to force some banks to merge or get out of the system.
The three came to a conclusion that there is no competition in the banking industry since they are too many.
“We should have like five or six major banks in the country”, the three suggested.
Already the Bank of Ghana (BoG) has advised local banks operating in the country to consider mergers, inter-bank acquisitions or enlistment on the stock market as ways of raising enough capital to meet the BoG’s capital base requirement of GH¢60 million.
Recently, a Deputy Governor of the Bank of Ghana, Mr. Millison K. Narh, was reported to have given this advice at the launch of the 10th anniversary of UniBank Ghana, an indigenous bank. He said: “Domestic banks may have to consider all available options of raising the GH¢60 million minimum capital requirement including mergers, acquisition or consolidate their positions by raising capital from the stock market.”
That, according to him, was necessary to enhance local competitiveness and further create a level playing field for all banks within the country’s financial sector.
Some banks in the country are however, already considering mergers.
Access Bank, for instance, has signed a Memorandum of Understanding with the Intercontinental Bank to merge.
It is not known yet why these two banks are merging, but some banking sector observers believe that the two banks might be merging to meet the Bank of Ghana capital requirement for banks in the country.
By Ekow Quandzie