A decision by the government to support some seven local banks financially so they meet Bank of Ghana's (BoG) minimum capital requirement has been justified.
The Bank of Ghana last year raised the minimum capital requirement of commercial banks from GH¢120 million to GH¢400 million and set a December 31, 2018 deadline.
Several banks were not banks were not able to meet the requirement but according to the Bank of Ghana, 22 banks have so far met the new minimum capital requirement.
The government has decided to support some seven local banks to meet the requirement.
This has raised several eyebrows and some are accusing the government of double standards and bias as they believe some banks are being favoured.
According to a government source, it was forced to support the planned bailout arrangement – which is private-sector led – because should the banks fold up, it will have a devastating effect on the economy.
The struggling local banks, according to the government, are making a significant contribution to the economy in terms of payment of taxes and providing employment.
For instance, the source noted that “we were worried about the direct and indirect job losses coming just after the collapse of the seven commercial banks.”
The government, according to the source, is concerned that the economy may not be ready to absorb another round of indirect jobs that will be occasioned if the seven struggling banks go down.
The government also considered the fact that if these banks are made to operate as savings and loans companies because of their inability to meet the new capital requirement, it will restrict a lot of business activities which would in turn impact negatively on their earnings and jobs.