The Bank of Ghana has collapsed five banks into a Consolidated Bank of Ghana Limited to support government's twin-objective of financial stability and strengthening indigenous banks.
By this the BoG has revoked the licences of BEIGE, Sovereign, Construction Bank, UniBank and Royal Bank.
Dr Ernest Addison, the Governor of BoG who announced this on Wednesday in Accra explained that the move followed the insolvency of the banks after investigations by Bank of Ghana.
He said government had issued a bond of GH¢5.76 billion to cover the gap between the liabilities and good assets assumed by the Consolidated Bank.
The BoG, he noted had approved Mr Daniel Addo as the new Chief Executive of the Consolidated Bank Ghana Limited and Mr Nii Doodoo Amanor of KPMG as receiver in respect of the bad loan assets of the five banks, under section 123 of the Banks and Specialised- Deposit-Taking Institutions 2016 (Act 930).
In addition, the Governor said government had appointed key management people to support in transitioning.
Mr Simon Dornoo would be the Consolidated Bank Director in charge of uniBank and Mr Alex Dodoo, Consolidated Bank Director in charge of Royal Bank.
Other appointments were; Ms Kesewa Brown, Consolidated Bank Director in charge of Construction Bank, Mr Babatunde Ampah, Consolidated Bank Director in charge of Beige Bank, and Boulders Advisors limited led by Mr Reggie France as Advisor to the Consolidated Bank Ghana Limited.
He noted that government has recapitalised the Consolidated Bank Ghana Limited to take on the selected good assets and all the liabilities of these five banks. The Governor said the country needed a strong and stable banking sector to drive the process of economic transformation adding that a weak banking sector meant that access to credit would be limited while lending rates would continue to be high.
He said BoG had the sole mandate by law to promote the safety, soundness, and stability of the financial system and to protect the interest of depositors.
Dr Addison recalled that the Asset Quality Review (AQR) of banks conducted by the Bank of Ghana in 2015 and updated in 2016, identified a few indigenous banks as vulnerable with inadequate capital, high levels of non-performing loans, and weak corporate governance.
In August 2017, he said the Bank closed two of those banks and approved the acquisition by GCB Bank of some of their assets and liabilities under a Purchase and Assumption Agreement.
"Other banks that were more recently licensed in 2016 and commenced operations in 2017 and also began to show signs of distress due to existing vulnerabilities that were not disclosed at the time of their licensing.
"Efforts by these banks to extricate themselves from financial difficulty have not borne fruit. The situation has rather worsened for these banks," he said.
Following that Dr Addison said uniBank and Royal Bank were identified during the AQR update in 2016 exercise to be significantly undercapitalised and subsequently submitted capital restoration plans to the BoG.
"These plans however, yielded no success in returning the banks to solvency and compliance with prudential requirements. The Official Administrator appointed for uniBank in March 2018 has found that the bank is beyond rehabilitation.
"Shareholders, related and connected parties had taken amounts totaling GH¢3.7 billion which were neither granted through the normal credit delivery process nor reported as part of the bank's loan portfolio.
"In addition, amounts totalling GH¢1.6 billion had been granted to shareholders, related and connected parties in the form of loans and advances without due process and in breach of relevant provisions of Act 930.
"Altogether, shareholders, related and connected parties of uniBank had taken out an amount of GH¢5.3 billion, constituting 75 percent of total assets of the bank," he said
In the case of Royal Bank, the Governor said an on-site examination conducted by the Bank of Ghana on 31st March, 2018 revealed a number of irregularities and said the bank's non-performing loans constitute 78.8 per cent of total loans granted, owing to poor credit risk and liquidity risk management controls.
Dr Addison said a number of the bank transactions totalling GH¢161.92 million were entered into with shareholders, related and connected parties, structured to circumvent single obligor limits, conceal related party exposure limits, and overstate the capital position of the bank for the purpose of complying with the capital adequacy requirement.
In the case of Sovereign Bank Limited, as part of Bank of Ghana's investigations into the failure of Capital Bank Limited (currently in receivership), it emerged that Sovereign Bank's licence was obtained by false pretences through the use of suspicious and non-existent capital. The bank is insolvent and unable to meet daily liquidity obligations falling due.
Liquidity support granted so far to the bank amounts to GH¢21 million as at July 31, 2018. The bank has not been able to publish its audited accounts for December 2017, in violation of section 90 (2) of Act 930.
He said the Beige Bank and Construction Bank were each granted provisional licences in 2016 and launched in 2017 and subsequent investigations conducted by the Bank of Ghana, revealed that both banks obtained their banking licences under false pretences through the use of suspicious and non-existent capital, which had resulted in a situation where their reported capital was inaccessible to them for their operations.