In recent times a lot of banks have found Ghana a good destination for extending their operations and this has heightened competition in the banking industry. By way of ensuring that banks maintain adequate working capital, the industry regulator i.e. Bank of Ghana
came out with a directive instructing all commercial banks to ensure that by the close of December 2012 their operating capitals do not fall below GH¢60million. As at the close of December 2011, almost all foreign banks had complied. However, some local banks are
sensing serious limitation in meeting the order. The study therefore had the objective of finding out the challenges facing these banks thereby recommending avenues for raising funds to meet the proposed capital requirement. Six banks operating in the Accra business
district namely National Investment Bank (NIB), Ecobank Ghana Ltd. (ECB), Prudential Bank, Ghana Commercial Bank, Merchant Bank Ghana and Zenith Bank were used for study.
Primary data was obtained by soliciting views from bank officials on questions like what challenges confront Ghanaian Banks in their cash mobilization efforts? How could the banks generate more funds from the Ghana Stock Exchange? What efforts were being made to
secure funding from strategic investors? How could they reduce operating cost to enhance working capital? The secondary data emanated from financial statements and brochures of
the banks. There was a direct approach to officers of these banks whose job description included liquidity adequacy or assets liability management. The questionnaire technique was
adopted as the ideal research instrument. The data was analyzed using SPSS application, TOPAZ and resulting charts and graphs was featured.
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Recommendations made call on the struggling banks to consider mergers and acquisition as a viable option to staying in business. It has also been suggested that The Central Bank could assist commercial banks in saving some funds to beef up their liquidity positions by financing compulsory service delivery systems such as ATMs, through long term loans. Some conclusions drawn are that some commercial banks genuinely need help to recapitalize and
that options being considered include attracting strategic international partners, mergers and acquisitions, as well as looking inwards to cut cost so as to step up liquidity levels.
Table of Contents
1.0 Introduction
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Objective of the Study
1.4 Research Questions
1.5 Research Methodology
1.6 Significance of the Study
1.7 Scope and Limitation of the Study
1.8 Chapter Disposition
2.0 Introduction
2.1 Meaning of Capitalization
2.2 The Types of Capitalization
2.3 Addressing Recapitalization Challenges Confronting Ghanaian Banks
2.4 The Need for Capitalizing Banks
2.5 A Sketch of the Reasons for and against Recapitalization
2.6 Essentials for a Successful Recapitalization
2.7 A Strategic approach to Cost Reduction in Banking
2.8 Recapitalizing through the Stock Market
2.9 Effects of Sound Bank Capital on Bank Behaviour
2.10 Foundations for the Link between Relationships, Illiquidity and Bank Capital
2.11 Disciplines from the Threat of Closure due to Capital Requirement
2.12 Challenges of Recapitalization
2.13 Prospects of Recapitalization
2.14 Summary and Conclusion
3.0 Introduction
3.1 Research Design
3.2 Study Population
3.3 Sampling Techniques
3.4 Research Instrument
3.5 Data Collection
3.6 Pretesting
3.7 Data Processing and Analysis
3.8 Ethical Consideration
4.0 Introductions
4.1 Analysis of Demographic Features of Respondents
4.2 Issues Relating To Challenges of Mobility of Extra Cash for Recapitalization
4.3 Analysis of Issues Relating to the Attraction of Strategic Investors
4.4 Analysis of Issues Relating to Generating more Funds from Ghana Stock Exchange
4.5 Analysis of Issues Relating to Reducing Cost to enhance Recapitalization Process
4.6 Findings
5.0 Introduction
5.1 Summary
5.2 Conclusion
5.3 Recommendation
Research Objectives and Themes
This study aims to examine the challenges faced by commercial banks in Ghana in meeting the recapitalization directive issued by the Central Bank of Ghana. It focuses on identifying effective strategies for cash mobilization, cost reduction, and the role of the Ghana Stock Exchange in supporting bank liquidity and growth.
- Adequacy of cash mobilization strategies in commercial banks.
- Potential of the Ghana Stock Exchange for raising new capital.
- Attraction of international strategic investors to local banks.
- Strategic cost reduction initiatives to improve liquidity.
- Regulatory constraints impacting cash mobilization efforts.
Excerpt from the Book
1.1 Background of the Study
Banking reforms have been an ongoing phenomenon around the world right from the 1980s; it has however more intensified in recent years due the impact of globalisation which is precipitated by continuous integration of the world market and economies. Financial restructuring mainly involve the recapitalization of the banks with equity injection where liquidity was low, and the cleaning up of the balance sheets of non-performing assets.
Capitalization refers to the process of determining the quantum of funds that a firm needs to run its business. Various financial management experts have indicated varying degrees of definition for capitalization. According to Guthman and Dougall (2002) “capitalization is the sum of stocks and bonds outstanding”. Bonneville and Dewey (2002) also note that “capitalization is the balance sheet value of stocks and bonds outstands”. Dewing (2004) is of the view that “capitalization is the sum total of the par value of all shares”.
Summary of Chapters
1.0 Introduction: Provides an overview of the study, the research problem, objectives, and methodological approach regarding the recapitalization of Ghanaian banks.
2.0 Literature Review: Examines theoretical perspectives on bank capitalization, challenges, and strategic approaches for cost reduction and recapitalization.
3.0 Research Methodology: Details the research design, study population, and analytical techniques used to gather and process empirical data.
4.0 Presentation and Analysis of Data: Presents the findings regarding current capitalization status, mobilization strategies, and the role of the Ghana Stock Exchange.
5.0 Summary, Conclusion and Recommendation: Synthesizes the main findings and provides recommendations for stakeholders and the regulator to support successful bank recapitalization.
Keywords
Recapitalization, Commercial Banks, Ghana, Liquidity, Ghana Stock Exchange, Cash Mobilization, Cost Reduction, Financial Reforms, Strategic Investors, SME Financing, Banking Regulation, Equity Injection, Corporate Governance, Financial Stability, Capital Base
Frequently Asked Questions
What is the primary focus of this research?
The research focuses on the challenges commercial banks in Ghana face while attempting to comply with the Central Bank's 2012 recapitalization directive.
What are the core research themes?
The key themes include cash mobilization efforts, the role of the Ghana Stock Exchange, strategic partnerships with investors, and internal cost reduction strategies.
What is the main objective of the study?
The objective is to analyze the effectiveness of cash mobilization strategies, investigate funding opportunities via the stock market, and suggest ways to reduce operating costs to improve liquidity.
What methodology was applied?
The study employed a pluralistic research approach, utilizing both primary data (questionnaires sent to bank officials) and secondary data (financial statements and industry reports).
What is addressed in the main part of the study?
The main sections cover a comprehensive literature review on bank capitalization, a detailed analysis of empirical data from six major banks, and a discussion on strategies for future financial stability.
Which keywords best describe this document?
Key terms include Recapitalization, Commercial Banks, Liquidity, Ghana Stock Exchange, and Financial Stability.
Why is recapitalization considered difficult for local banks?
Local banks face limitations due to public preference for treasury bills, market saturation, and the high cost of operations compared to their foreign competitors.
What role does the Central Bank play according to the study?
The study suggests the Central Bank should support local banks by potentially reducing reserve requirements and guaranteeing international loans to ease the financial burden of recapitalization.
- Arbeit zitieren
- AMABE Edmund Benjamin-Addy (Autor:in), 2012, Prospects and Challenges of Re-capitalising Commercial Banks in Ghana, München, GRIN Verlag, https://www.hausarbeiten.de/document/198123
