Banks may be going through a lot of stress currently as the central bank tries to sanitise the industry, but Country Senior Partner at PricewaterhouseCoopers (PwC), Vish Ashiagbor, believes all parties stand to benefit at the end of the day.
Not only do banks have to meet the central bank’s GH¢400million minimum capital requirement, they also have to adjust to the Basel II and III framework which aims at prudent capital regulation, supervision and market discipline.
Speaking to the media after a PwC seminar to share insights on Basel from other territories in Africa, Vish Ashiagbor said: “There certainly will be a level of stress, but it is a balance. The idea is to manage the risks better, so some of the risks – whether external or otherwise – the idea is to show the banks how to manage these risks better.
“If you look at the history of our banking industry, you see some of the banks often waver whenever there is an external factor that hits us – all of this is designed to strengthen the banks. Yes, there will be some stress because you have to make adjustments to what you are used to. But the ultimate goal is to have a stronger industry, which benefits all of us.”
Mr Ashiagbor said, like all processes, there is a need to start from somewhere and build from there.
“I don’t think we are 100 percent ready, but we should start and refine it as we go along. Obviously, the regulator will be encouraged to improve as the returns come in. As they do their supervisory checks, they will see where there are some gaps and encourage the banks to fix those as quickly as possible,” he said.
Customers and clients, he said, should be interested in the development because it speaks to the strength and capacity of banks that they are dealing with.
“As a depositor or client, you’re interested in the bank’s capacity to provide services to you on a long-term basis; and some of these initiatives are designed to strengthen the banks,” he said.
Capital requirement directive
The symposium, which was facilitated by Mr Irwin Lim-Ah Tock-Banking and Capital Markets Regulatory Practice Leader PwC South Africa, also aimed to explore components of regulatory change on banks and consider from a strategic viewpoint subject such as Internal Capital Adequacy Assessments.
The Bank of Ghana’s Capital Requirement Directive (CRD), the primary rule-book for Basel II & III, became effective from January 1, 2018.
The Basel Accord is a set of banking regulations put forth by the Basel Committee on bank supervision, which regulates finance and banking internationally.
Basel II attempts to integrate Basel capital standards with national regulations, by setting the minimum capital requirements of financial institutions with the goal of ensuring capital adequacy of banks.
Basel II introduces operational risk considering that many failures and difficulties experienced by banks in history were not only attributable to credit and market risks but largely to operational risk.