Capital Adequacy under Basel 3: Its Implications for Large Commercial Banks in Ghana and Kenya

The recent global financial crisis (2007-2009) might seem like a distant memory, however the impact and implications of the Basel 3 Accord¹, (the brain-child of the Basel Committee on Banking Supervision (BCBS) and the G20) lives on; at least for the entire phase-in period (1 January 2013 to 1 January 2023). Even though Ghana and Kenya like some other African countries were affected by the global financial crisis (although not to the same extent as some European countries), both countries as well as most African countries were conspicuously absent during the negotiations phase of Basel 3, perhaps with the exception of South Africa. Notwithstanding this under-representation by African countries, Basel 3 is expected to have a degree of impact and implications for large commercial banks in Ghana and Kenya and the African continent at large. In view of this, an analysis of the impact and implications of the capital adequacy provisions of Basel 3 on large commercial banks in Ghana and Kenya would be incomplete without first highlighting the relevance of Basel 3 to African countries. The capital adequacy provisions of Basel 3 requires banks to ensure that they possess enough capital which must be of sufficient quality to address banking risks and to absorb substantial bank losses – a requirement already being met by banks in South Africa, a member of the G20. With South Africa having already begun the implementation of Basel 3, it is only a matter of time before other African countries follow suit. Nonetheless and regardless of whether Ghana and Kenya implement Basel 3 or not, there will be implications for all, not least the large commercial banks within these 2 jurisdictions. This thesis thus investigates the implications of the capital adequacy provisions of Basel 3 on large commercial banks in Ghana and Kenya.