The Bank of Ghana has revised the mergers and acquisitions directive, aimed at preventing the adverse impact on competition and stability of the financial system.
The directive is Pursuant to Sections 54(4) and 92(1) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), and was done in consultation with the banking industry as well as the development partners, mainly technical assistance missions from the International Monetary Fund/ AFRITAC West 2.
It is also aimed at operationalising relevant sections of Act 930 pertaining to mergers and acquisitions by providing guidance on the processes and procedures for evaluating applications for mergers and acquisitions and the required information, documents or agreements to be submitted to the Bank of Ghana in the application process.
According to the Central Bank, this was carefully considered in the light of feedback, comments and contributions received during the public consultation process.
It addresses material issues identified in the exposure draft of the Mergers and Acquisitions directive. The document therefore explains the significant revisions reflected in the final version of the directive titled Mergers and Acquisitions Directive, 2021.
The directive, originally cited as the Mergers and Acquisitions 2018 is now cited as the Mergers and Acquisitions Directive, 2021, to properly reflect the year of issue to support referencing.
The scope of the objectives of the directive is expanded to reflect the operationalisation of the relevant provisions of Act 930 pertaining to mergers and acquisitions.
Review of applications for approval of sale of business, mergers or reconstructions
The Central Bank said a transaction involving a foreign bank shall not be approved unless the home supervisor of the foreign bank indicates that it has no objection to the transaction.
Also, a proposed transaction that has the effect to substantially lessen competition shall not be approved unless the Bank of Ghana finds that the anti-competitive effects of the proposed transaction are clearly out-weighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served.
In the case of listed banks or SDIs, the regulator of the banking industry said a person who acquires shares of a bank or specialised deposit-taking institution in connection with a takeover, merger or amalgamation of a bank or specialised deposit-taking institution shall meet the requirements of this directive before applying for a review and approval of the takeover, merger or amalgamation under the Securities Industry Act, 2016 (Act 929).
General criteria for merger /acquisition approval
The Bank of Ghana said it may approve a merger or acquisition if it is satisfied that a proposed merger or acquisition arrangement shall be for the benefit of the stability of the financial system as a whole, shall not be detrimental to the interest of the depositors and other creditors, among others.
Approval by BoG
The Central Bank pointed out that there shall be a three-stage approach to the application procedure, with two inherent approval stages of an application for a merger or acquisition by a bank or SDI.
These are pre-merger/ acquisition consent, provisional approval and final approval