Banks, economists call for reserve ratio re-think

06 Oct

Commercial Banks have backed calls from some economists that the Bank of Ghana should either reduce the primary reserve ratio of commercial banks or pay some interest on it.

Commercial banks are obliged to retain 9 percent of their stated capital as primary reserve ratio to act a buffer against any unforeseen circumstances.

The economists argue that the reduction or interest payment on the money could help drive lending rates down by providing more revenue for the banks. This according to them could be used to defray some of their costs which are usually cited for the high lending rates.

Supporting this argument are some Managing Directors of some banks including Cal Bank’s Frank Adu and Zenith Bank’s Daniel Asiedu among others who spoke exclusively to Citi Business.

“When the customer gives me One Cedi, the customer expects me to pay him interest on the full One Cedi so when the Central Bank takes 9% of that One Cedi from me why shouldn’t the Central Bank give me interest to give back to the customer? All I am saying is that if you take our money, pay us the interest on it. I think that we are all business people and if you have money somewhere and it is not yielding interest, naturally, it affects your bottom line so for us, if they pay the interest, it will go a long way to help and improve our bottom line.”

The proposal comes at a time when the EU and America’s Central banks have instead raised their reserve ratio from 2 percent to 7 percent. The new set of regulations called Bassel-3 is to prevent another financial crisis. It is due to come into effect from 2013 and be phased in over several years, after ratification by the heads of government of the G20 group of nations at their summit in November 2010.


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Posted by on 6 October, 2010 in BUSINESS


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