Recapitalization of Banks: Analysis of the Ghana Banking Industry

Recapitalization of banks has been a topic of discussion between politicians, economists, bank regulators, academicians and the general public due to its role in the country’s economic growth. This reform has been implemented in a number of countries to improve a strong banking system of which Ghana is not an exception. The main objective of the study is to ascertain the effects of recapitalization on the Ghanaian banking sector. In a decade (2007 to 2017) there have been 3 various recapitalizations (2007, 2012 and 2017) of the Ghana banking industry. The study is conducted to prove if the recapitalization of banks has been worth it using the 2012 exercise as the benchmark. Various literatures are reviewed, and scholars cited. The study adopts quantitative research technique based on ex-post factor design. It uses secondary data on the research variables (cost to income ratio, profit before tax, non-performing loans, return on assets, return on equity, Net interest margin, capital adequacy ratio, liquidity ratios, asset quality ratios) over the period 2007 to 2018. Analytical techniques of both descriptive statistics and independent sample test were adopted for the study. The t-test for equality of means was used to ascertain evidence of statistically significant difference in banking sector performance indicators and the Levene’s test for equality of variance was also adopted. The study concludes that banking recapitalization has the potential to promote the performance of banks in the industry. Hence it was recommended that the central bank (BoG) initiates sufficient regulatory measures to sustain the benefits of banking recapitalization to benefit depositors and the nation as a whole.