A member of the Finance Committee in Parliament, Benjamin Komla Kpodo, has suggested mergers and outright acquisition of banks in the country as one sure way to assist distressed financial institutions from hostile takeovers and collapse.
He believes that it would also be in the bigger interest of the country’s banking industry if big banks think of buying out smaller banks that are listed on the stock market but going through some distressing situations.
According to the Ho Central MP, such a move will not only bring about some level of sanity into the bank sector, but also boost confidence in customers and shareholders.
“What we are thinking is the smaller banks should think of merging or there should be the bigger ones targeting the smaller ones to purchase these, especially if they are listed on the stock exchange or through any means of arranging acquisition. So that they can sanitize the industry and not be getting up early morning to hear this kind of folding up and takeovers,” he noted.
The Finance Select Committee member was commenting on the central bank’s announcement of the collapse of UT Bank and the Capital Bank, both indigenous Ghanaian banks, Monday, this week, following their inability to turn around their negative capital adequacy position which necessitated a Purchase and Assumption agreement, allowing GCB Bank to take over all deposit liabilities and selected assets of both UT Bank and Capital Bank, per Section 123 of the Banks and Specialised Deposit-Taking Institutions (SDIs) Act, 2016 (Act 930).
Mr. Kpodo, during an interview with this paper, supported an earlier suggestion made by Finance Minister, Ken Ofori Atta, to the effect that the banking sector of Ghana should have about five major commercial banks operating within the sector as it pertains in other jurisdictions on the African continent.
“I heard the Minister of Finance saying that in his opinion five banks can be enough for the country, I think similar situation prevails in South Africa where, in spite of the economy being larger than ours, population being more than ours, have, I think, four or five banks for the entire country. So it will be good if the businesses come together to enhance their size and to become more efficient in the delivery of their services,” he intimated.
The MP acknowledged the challenge that some individual owners of most small financial institutions go through, especially in fulfilling their obligation of meeting the Bank of Ghana’s minimum requirement, and stressed the need for mergers between these small banks to enable them to meet the central bank’s unexpected requirement when the need arises.
He was quick to add that although there are no laws stating emphatically the need for banks to come together, it is standard practice that mergers and acquisition take place within a particular industry.
“Many of the banks are owned by individuals and family friends and as the Bank of Ghana continues to raise the minimum capital requirement, there is always the burden on the owners to find the money and be able to meet those requirements. That is the situation. So it would be good if they come together to become bigger and perhaps efficient in their operation and that has come to the mind of some of us,” he added.