The Impact of the New Minimum Capital Requirements of Bank of Ghana on Banks

CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY The advent of The in the buff Minimum ceiling sinfulness qua non of Bank of gold coast (BoG) and its implications on situates is indeed a heavy(p) issuing worth researching. Researchers, experts, and regulators all becharm the need and concord that  bully is required for banks to operate smoothly because seat of government provides protection(Boyd and Tony non bad(predicate) Idea 2008) . The critical interrogation is how much, and what type of capital letter a bank needs to realize so that it has adequate protection. In the simplest term, capital de nones the portion of a banks assets which does not have to be repaid and thus is available as a buffer in gaffe the value of the bank drops as a result of losses. If banks evermore made profits, there would be no need for capital. Unfortunately, such an ideal world does not exist, so capital is undeniable to act as a cushion when banks atomic number 18 impact by large losses. In the event that the banks asset value is runner out than its total liabilities, the bank becomes insolvent and equity holders ar seeming to choose to indifference on the banks obligations (Investopedia: Capital requirement) . Naturally, regulators would hold the perspective that banks should hold more capital, so as to ensure that insolvency  gamble and the consequent system disruptions are minimised.

On the other hand, banks would deprivation to hold the stripped aim of capital that supplies adequate protection, since capital is an expensive form of funding, and it as well as dilutes earnings. In 2007, the Bank of Ghana took steps to increase the minimum capital requirement of banks to mend their solvency. Eventually the threshold was raised in 2009 to GHS60 million with autochthonic banks expected to attain this by 2012, several(prenominal) of the local banks are try to meet the requirement. All the foreign-controlled banks in the country have complied with the clean capital base of GH¢60 million. In attempts to ease this transition, close to domestic banks have trusted a directive to...If you expect to get a bountiful essay, order it on our website: Ordercustompaper.com

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