On the re-opening of SLPP Office … “We would never encourage violence” John Benjamin...

Sierra Leone News: BSL reviews minimum paid up capital for commercial banks

GovrnIn their meeting held recently, the Banking Supervision Technical Committee (BSTC) of the Bank of Sierra Leone, chaired by the Governor, Mr. Sheku Sambadeen Sesay commenced the process of revising the Minimum paid up capital requirement for operating a commercial bank in Sierra Leone.
The meeting considered the reports of recently concluded examinations of banks, the size of their loan portfolios and risk exposure in the process of financial intermediation. The Committee specifically considered the aggregate percentage exposure of depositors’ funds in the overall loan portfolio in addition to the soundness of the liquidity positions of commercial banks vis-a-vis the current economic growth prospect of Sierra Leone.
The Bank conducted a similar exercise in 2009 raising the minimum paid up capital requirement in the industry to Le30bnfrom Le15bn, over a five years period. The Bank recently conducted a Survey of the minimum paid up capital requirement of other countries in the sub region and found Sierra Leone’s to be lowest. The minimum paid up capital requirement in the sub region range between US$10 and US$160m. Sierra Leone’s minimum paid up capital, as of today, is US$5.5M.
At the current level, banks in Sierra Leone are disadvantaged as to the size and types of intermediation they can provide. They are therefore severely constrained to support private sector led growth and to withstand any serious shock in the credit market, unless their capital is substantially increased.
Speaking to members of the BSTC, Governor SambadeenSesay reiterated his commitmentto protect depositors’ funds and to ensure that commercial banks are in a solid financial position. He noted that banks are the facilitators of economic development and unless they are financially sound, safe and viable, their capacity to do so will be threatened.
He therefore called on members of the Committee to compare Sierra Leone’s banking industry requirements with neighboring states, determine whether banks, in their current position, are sound enough to support economic development in Sierra Leone, in line with regional trends and international best practice. Based on regional trends, he urged them to propose new minimum capital requirement for the operation of a commercial bank to ensure that any bank operating in the jurisdiction can realistically support private sector led growth while preserving financial stability in the country.
He impressed upon members that it may result in possible mergers, or out right sale of banks but it was paramount that banks are capable of supporting the requirements of an expanding economy.
Friday December 06, 2013

Comments are closed.