For in recent times, a lot of banks have rated Ghana a good destination to extend their operations, the competition in the banking industry has heightened. To ensure that banks maintain adequate working capital, the industry regulator, i.e. the Bank of Ghana, issued a directive instructing all commercial banks to ensure that by the close of December 2012 their operating capitals do not fall below GH¢60million. At the close of December 2011, almost all foreign banks had complied. However, some of the local banks are sensing serious limitation in meeting the order. Therefore, the study has the objective to identify the challenges these banks have to face and thereby, the author will recommend avenues for raising funds to meet the proposed capital requirement.This study is based on six banks that operate in the Accra business district, namely the National Investment Bank (NIB), the Ecobank Ghana Ltd. (ECB), the Prudential Bank, the Ghana Commercial Bank, the Merchant Bank Ghana and the Zenith Bank. Primary data was obtained by soliciting views from bank officials on questions as the following. Which challenges confront Ghanaian Banks in their cash mobilization efforts? How could the banks generate more funds from the Ghana Stock Exchange? What efforts were made to secure funding from strategic investors? How could they reduce operating cost to enhance working capital? The second data set is based on financial statements and brochures of the banks. There was a direct approach to officers of these banks whose job description included liquidity adequacy or assets liability management. The questionnaire technique was adopted as the ideal research instrument. Moreover, the data was analyzed by means of SPSS application, TOPAZ and further, the resulting charts and graphs were featured.

Edmund Benjamin-Addy was born in Accra, Ghana but, he hails from Apam in the central region of Ghana. Recently, he obtained his masters degree in finance from the Methodist University College Ghana. Thereby, the conclusion of the saying Successful People Builds with the Bricks others Throw at Him has been his major motivation in life. First, the author worked as a resettlement assistant, in company with the Millennium Development Authority, a Ghana programme that works under the authority of the Millennium Challenge Account of the United States government. Afterwards, he has been working as a financial analyst for the Black Star Advisors. This is the writers first script. His interest in the banking sector motivated him to undertake a thorough study in this area.

Text Sample:Chapter 2.4, The Need for Capitalizing Banks:According to Field (2008) when a nations bank experience major losses, depositors, the markets, and regulators respond The market responds by making it difficult for the bank to raise funds. Depositors may rush to withdraw funds from the banks. The regulators, according to Levine (1998) respond by closing banks, guaranteeing their liabilities, or recapitalizing them. The most obvious decision that regulators have to make is whether to let banks fail. Do their inabilities to raise sufficient private capital indicate that they are not viable or produce future services that are worth less than their cost, and thus should be closed? Only if the government, depositors, and borrowers were first allowed to jointly renegotiate first, would the inability to restructure indicate that the banks are not viable. According to Hogarth and Thomas (1999) in many countries, there is a very deep government safety net and substantial regulations that influences discussions on bank capital structure. So one approach in the view of Sufian and Chong (2008) would be to ignore the markets and analyze bank recapitalization as a bargaining situation between banks and regulators. Even with total deposit insurance, Hassan and Bashir (2003) are of the opinion that the banks will need to consider the effects of their credit rating on the other lines of business they can provide. If the level of capital is below the minimum necessary to stay in business (and this minimum will actually be enforced), then, Flannery (2009) thinks banks will need to do whatever it takes to increase their capital to the minimum. This whatever it takes type of bank behavior, Nakaso (1999) argues could have undesired effects on the economy. It focuses on the effect of bank recapitalization on banks and their existing borrowers. According to Banks (2004) the effect on future borrowers (new business development) is ignored on the basis that new banks, other recapitalized banks, or even foreign banks could provide such new relationship-based funding without a subsidized recapitalization of the majority of existing banks. Recapitalizing a large number of banks, according to Goddrad et al (2004), is desirable only if it protects the value of existing relationship lending and human capital in banks and firms. If the reason to have a well-capitalized banking system is to ensure that new relationships can be established, then it can be achieved by recapitalizing a few of the best banks. The analysis here points out that the recapitalization, and ist extent, can result in transfers between banks and borrowing firms that can go in either direction. This result is because according to Rivard and Thomas (1997) bank capital influences the bargaining between a bank and ist borrowers. In addition, recapitalization can have efficiency effects by influencing a banks decision whether to foreclose on ist defaulted loans. According to Cooper et al (2003) the amount of current bank capital, affects the behavior of a bank when it is required to have a minimum amount of capital in order to remain in business. The same effect occurs when the threat of closure due to low capital comes from market participants who, according to Brissimis et al (2008) may not provide capital or from potentially uninsured depositors who may withdraw deposits.