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 desires is indeed a heavy(p) topic worth researching. Researchers, experts, and regulators all think 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 read/write head is how much, and what type of dandy a bank needs to discernment 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 and then is available as a buffer in incase 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 an ideal world does not exist, so capital is demand to act as a cushion when banks are impact 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 neglect on the banks obligations (Investopedia: Capital requirement) . Naturally, regulators would hold the setting that banks should hold more capital, so as to ensure that insolvency  endangerment and the consequent system disruptions are minimised.

On the other hand, banks would paying attention 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 Ba nk of Ghana took steps to increase the minim! um capital requirement of banks to reform their solvency. Eventually the threshold was raised in 2009 to GHS60 million with natural banks expected to attain this by 2012, several(prenominal) of the local banks are seek to meet the requirement. All the foreign-controlled banks in the country have complied with the newly capital base of GH¢60 million. In attempts to ease this transition, more or less domestic banks have certain a directive to...If you privation to get a full essay, order it on our website: BestEssayCheap.com

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