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 novel Minimum ceiling sine qua non of Bank of gold coast (BoG) and its implications on brinks is indeed a heavy(p) topic worth researching. Researchers, experts, and regulators all hear 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 heading is how much, and what type of slap-up a bank needs to stamp down 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 indeed is available as a buffer in fictitious character the value of the bank drops as a result of losses. If banks endlessly 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 impacted by large losses. 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 disregard on the banks obligations (Investopedia: Capital requirement) . Naturally, regulators would hold the count on that banks should hold more capital, so as to ensure that insolvency  guess and the consequent system disruptions are minimised.

On the other hand, banks would conjure 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 amend their solvency. Eventually the threshold was raised in 2009 to GHS60 million with natal banks expected to attain this by 2012, several(prenominal) of the local banks are essay to meet the requirement. All the foreign-controlled banks in the country have complied with the parvenue capital base of GH¢60 million. In attempts to ease this transition, most domestic banks have certain a directive to...If you trust to get a full essay, order it on our website: BestEssayCheap.com

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