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 forward-looking Minimum ceiling sine qua non of Bank of gold coast (BoG) and its implications on swears is indeed a heavy(p) topic worth researching. Researchers, experts, and regulators all mark the need and concord that  hood is required for banks to operate swimmingly because seat of government provides protection(Boyd and Tony nifty Idea 2008) . The critical scruple is how much, and what type of swell a bank needs to cargo area 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 thence is available as a buffer in content the value of the bank drops as a result of losses. If banks ever so made profits, there would be no need for capital. Unfortunately, much(prenominal) an ideal world does not exist, so capital is demand to act as a cushion when banks are force by large losses. In t he event that the banks asset value is start out than its total liabilities, the bank becomes insolvent and equity holders are seeming to choose to carelessness on the banks obligations (Investopedia: Capital requirement) . Naturally, regulators would hold the position that banks should hold more capital, so as to ensure that insolvency  riskiness and the consequent system disruptions are minimised.

On the other hand, banks would deprivation to hold the minimum level of capital that supplies adequate protection, since capital is an expensive form of funding, and it also dilutes earnings. In 2007, the Bank of Ghana took steps to increase the minimum! capital requirement of banks to improve their solvency. Eventually the threshold was raised in 2009 to GHS60 million with autochthonal banks expected to attain this by 2012, several(prenominal) of the local banks are attempt to meet the requirement. All the foreign-controlled banks in the country have complied with the pertly capital base of GH¢60 million. In attempts to ease this transition, nearly domestic banks have certain a directive to...If you command to get a full essay, order it on our website: BestEssayCheap.com

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