Cal Bank Limited has revealed plans to transfer GH¢50 million from its income surplus to increase its stated capital to meet the GH¢400 million minimum capital requirement set by the Bank of Ghana (BoG).
This exercise will, however, be carried out only after it has fully audited its 2018 full year accounts and received approval from its shareholders. The bank has up to the end of March 2019 to carry out the exercise.
The Executive Director of the Bank, Mr Philip Owiredu, announced this when the company took its turn at the Ghana Stock Exchange’s Facts Behind the Figures session on November 7.
The BoG in September 2017 increased the minimum capital requirement for universal banks from GH¢120 million to GH¢400 million and gave a deadline of up to December 31, to meet this new requirement.
Some of the options which the BoG outlined for the banks to use to recapitalise included the injection of fresh capital, rights issue and the transfer of income surplus to stated capital.
Mr Owiredu said Cal Bank decided to choose the income surplus option to recapitalise because it did not want to put additional burden on its shareholders.
Subsequently, the bank submitted its proposal to transfer GH¢300 million of its income surplus to stated capital which was approved by the BoG.
However, the shareholders at its annual general meeting this year approved that GH¢250 million be transferred, which increased the bank’s stated capital to GH¢350 million, leaving a shortfall of GH¢50 million.
Mr Owiredu said the bank intended to add the GH¢50 million by falling on its income surplus once more.
not a challenge
He said the bank raising the additional GH¢50 million was not a challenge because it had an income surplus of GH¢120 million as at the end of the third quarter which was even expected to increase further by year end.
“We will definitely add the difference of GH¢50 million after we complete the audit for 2018. The deadline is December 31 but the audit will be completed and signed after December 31 so technically, someone will say we have not met the requirement but discussions have gone on with the BoG and when the directive came out.”
“Because you are saying that banks can capitalise with their audited income surplus at the end of 2018 but meet the directive at the end of 2018 so obviously, there was some sort of disconnect over there but we have engaged them and have confirmation that based on the returns that we send to them on a monthly basis, they will know whether we can meet it or not,” he explained.
On the way forward, he said, the bank would continue to do what it was doing now because the banking landscape had not changed significantly in terms of products and services.
On the regulatory front, he said, a lot had changed because the BoG had introduced a number of guidelines and regulations which the bank would be mindful of, going forward.
“One key thing we are very mindful of is that the BoG for the past months has been very strict with regulations and we do not want to flout any of them,” he stated.
He also indicated that some regulations such as the implementation of Basel II and III which would start in January 2019 would have significant impact on the capital of banks.
“The significant challenge is the capital adequacy ratio (CAR) which will be increased from 10 per cent to 13 per cent under Basel II and III. Under these new principles, capital charges will be higher than the current principles which will also drop the CAR of banks,” he noted.
“The first hurdle will be to meet the GH¢400 million, but the second and most significant hurdle will be to ensure that you operate above 13 per cent,” he stated.
He added that “when you take the balance sheet of banks through this year, you will realise that loan growth is minimised and this is because the capital charge for loans is going up so at any time that you make loans, it affects your capital.”
As a result, he said, capital management would be one of the key things for the banks, going forward.