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Ken Ofori-Atta, Finance Minister and Mensah Thompson, Executive Director of Alliance for Social Equity and Public Accountability

Collapse of banks: uniBank, others targeted for takeover – ASEPA

THE TAKEOVER of uniBank and other indigenous banks has been described as nothing but political targeting clothed in what the government describes as banking sector reforms.

The Executive Director of Alliance for Social Equity and Public Accountability (ASEPA), a civil society organisation, Mensah Thompson, at a press briefing yesterday, agreed that though there were systemic challenges in the sector that needed to be addressed, “we believe this whole so-called clean-up was a sham and cruel act of mercenary targeted at indigenous banks”.

Thompson’s presentation at the briefing was titled ‘Assessing the Socio-Economic Impact of the Banking Sector Reforms on the Ordinary Ghanaian.’

The presentation also attempted to prove that the clean-up was orchestrated by the government through the Minister of Finance, Mr Ken Ofori-Atta, and the Governor of Bank of Ghana (BoG), Dr Ernest K. Y. Addison.

He said some of the banks exhibited fundamental weaknesses and so needed to be strengthened with the help of the regulator, “but it is also an indisputable fact that some of the banks were not as weak as the Government made it look like. In fact, most of the weaknesses which the BoG stood on to revoke their licences were artificially created distress by the BoG.”

Thompson said the classic example was the downgrading of uniBank’s portfolios at three different times within a month just to bring it to a financial position where it would be convenient to collapse it and defend the action.

The Executive Director of ASEPA said he had in his possession a letter uniBank wrote to the BoG complaining about how an annual scheduled audit of the BoG had turned into a weekly routine audit by the different groups of auditors from the Banking Supervision Department of the BoG, auditing the same books, the same loan portfolios and downgrading the same loan portfolios at each turn just to create artificial insolvency and then collapse uniBank.

He said at a time the government was accusing uniBank and other indigenous banks like Royal Bank and GN Bank of having not met the minimum requirements, “The Minister of Finance deliberately refused to pay GHC5.7 billion of monies owed to contractors who borrowed those monies largely from Ghanaian banks. The payment of these contractors alone would have contributed about GHC5.7 billion to the recapitalisation of these local banks.

“Banks such as uniBank would have received GHC1 billion to survive whilst Royal Bank and GN Bank would have received in excess of GHC2.3 billion to meet the minimum capital requirements.”

He said when the Finance Minister was refusing to pay these monies and the loans granted to these contractors by the banks which had become overdue, Dr Addison at the BOG was sending his team of auditors at the Banking Supervision Department of the BoG to go and write off those loans (government debts), which further impaired or wiped off the tier-one capitals of the largely local banks.

“So while uniBank was looking to raise GHC400m to meet the new minimum capital requirements, BOG had forced it to write off overdue Government debts to contractors and other Government obligations to the bank to the tune of GHc1 billion.

“The strategy of impairing minimum capital of uniBank to declare it insolvent was also perfectly applied to the GN Bank and Royal Bank,” he said.

Records

Thompson said before the collapse of these financial institutions, the records show that Databank and its affiliates had started redeeming their investments from Ghanaian banks, and fund management companies.

He said they thus withdrew their monies from UT Bank, Beige Bank, Legacy Finance and many other banks and institutions regulated by the Security and Exchange Commission (SEC).

The ASEPA Executive Director said in May 2018, after Databank and the Enterprise Group had moved all their monies to ‘safety’, Rev Ogbamey Tetteh, the SEC Commissioner, asked all SEC-regulated institutions to redeem all their investments within six months.

“This began a process of creating massive confidence crisis and liquidity crunch that later brought the industry to a standstill and an imminent collapse,” Thompson said.

He added that the directive created a web of redemptions and counter-redemptions on SEC-regulated companies and led to panic withdrawals.  Largely, he said, Ghanaian-owned banks struggled to raise the new minimum capital.

“Today, Ghana’s securities industry has totally collapsed and the SEC has become an Arbitration Centre instead of a regulatory point.

“As SEC was collapsing and inciting panic withdrawals in the securities industry and against local banks, Dr Addison and his team at BOG launched their first attack. They withdrew the licences of UT and Capital banks and announced a purchase and assumption agreement for GCB to take over selected assets and liabilities of the two collapsed banks.

“This set in motion a sustained panic withdrawal in the entire financial sector, that hit hard at Ghanaian banks and savings and loans companies, finance houses, fund management companies, rural and community banks, credit unions, micro-finance institutions and many others.”

He said in December 2018, the action of the BOG had led to the collapse of seven more banks, 23 savings and loans companies and 347 micro-finance institutions.

He pointed out that the BoG based its action on such factors as

insolvency; manipulation of initial capital; related party transactions; stealing and improper dealing of shareholders and directors; and over-exposure of shareholding to a single shareholder but while such acts could attract sanctions and penalties, they did not constitute grounds for revocation of licences and that there could have been a programme of corrections fairly and impartially implemented.

“What is worrying is that for every single reason given for the collapse of the nine banks, there were more grievous of same in relation to the so-called special banks that are still alive,” Thompson indicated.

Political targets in the reforms

On the political bit of the banking sector reforms, the ASEPA Executive Director mentioned uniBank and Heritage Bank and stated that uniBank, for instance, endured five Assets Quality Reviews (AQRs) in August 2017.

‘These reviews ended with downgrades in the bank’s loan portfolio, ostensibly to run down the bank and ultimately led to what happened on August 14, 2017 – a takeover alongside four other banks,’ he said.

He said in the circumstances, uniBank lost over GHc2 billion in deposits within four months of being put under administration, while it was owed over GHc1 billion through Government contractors and Government itself, which Ken Ofori Atta refused to pay.

 

Ghana/dailyheritage.com.gh/News Desk Report

About michael adjei

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