The Effects of Financial Sector Recapitalization Policy on the Performance of Banks in Ghana: A Comparative Study of Ghana Commercial Bank and Ecobank Ghana

Abstract

The Bank of Ghana in 2008 firmed up its policy to raise the minimum capital of banks in the country. This study examined the relevance of recapitalization in the banking industry. Specifically, the study investigates the basis for banks capital regulation in Ghana, assessed the impact of recapitalization on the performance of banks and identified challenges posed by the exercise to banks in Ghana.  Secondary data were extracted from the banks and analyzed using ratio to measure the banks performance. The first phase, 2009 recapitalization is adopted as the base year, testing the performance of banks three years before the 2009 recapitalization exercise and a year after the 2009 recapitalization exercise to see the significance of the  recapitalization. The study found that it is not all the time that recapitalization transforms into good performance of the bank and it is not only capital that makes for good performance of banks. The study posits that bank recapitalization exercise has significant relationship on the pre and post recapitalization profitability indices of the selected banks. The study recommends that there should be a critical look at the mode by which banks raise funds and that banks should be train on post recapitalization issues.

Keywords; Recapitalisation, Banking Sector, Ghana Commercial Bank, Ecobank