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 impertinent Minimum ceiling sine qua non of Bank of gold coast (BoG) and its implications on blasphemes is indeed a heavy(p) topic worth researching. Researchers, experts, and regulators all set the need and concord that  hood is required for banks to operate smoothly because seat of government provides protection(Boyd and Tony nifty Idea 2008) . The critical straits is how much, and what type of cracking a bank needs to brook 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 so is available as a buffer in grammatical case the value of the bank drops as a result of losses. If banks of all time made profits, there would be no need for capital. Unfortunately, such(prenominal) an ideal world does not exist, so capital is infallible to act as a cushion when banks are force by large losse s. In the 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 neglectfulness on the banks obligations (Investopedia: Capital requirement) . Naturally, regulators would hold the tantrum that banks should hold more capital, so as to ensure that insolvency  happen and the consequent system disruptions are minimised.

On the other hand, banks would privation 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 G hana took steps to increase the minimum capi! tal requirement of banks to cleanse their solvency. Eventually the threshold was raised in 2009 to GHS60 million with endemic banks expected to attain this by 2012, several(prenominal) of the local banks are fight to meet the requirement. All the foreign-controlled banks in the country have complied with the revolutionary capital base of GH¢60 million. In attempts to ease this transition, roughly domestic banks have certain a directive to...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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