What happened?

Section 107 of Act 930 empowers the Bank of Ghana to appoint an Official Administrator to take official control of a bank when its capital adequacy ratio (CAR) has fallen below 50% of the required minimum of 10% (i.e. below 5%) which was the case with uniBank. The capital adequacy ratio (CAR) is a measure of a bank’s capital. It is expressed as a percentage of a bank’s risk weighted credit exposures (credit risk, market risk and operational risk). Most importantly, this measure is used as a basis to protect depositors and promote the stability and efficiency of the financial systems (Investopedia).

In the case of UT and Capital Bank’s collapse, the Governor of BoG, Dr. Ernest Addison, blamed it on lack of good corporate governance exhibited by the two banks. He said, “Corporate governance plays an important role in promoting a sound financial system, contributing significantly to improving overall performance not only in profits but in credibility.”

Without self-discipline exhibited towards the implementation of good corporate governance policies and practice, any corporate organization will be headed for doom.
From the BoG’s communique, it seems weak supervisory standards and lapses in operational procedural are what informed the decision to take over the Administration of the Bank. The question is whether BoG is reacting to the earlier communication of interest in adb by UniBank or its acting in its capacity as the regulator (due process).

1. Does the regulator in this case, referee, being reactive in its duties? 2. Is the banking sector adhering to proper Corporate Governance practice? 3. What are the punitive actions that will be meted out to Management of institutions, with issues such as creative accounting and non-compliance with directives from the central Bank? 4. Subsequently, was uniBank trying to increase its Capital Adequacy Ratio with the BELSTAR move in the form of financial engineering by the so-called claim of pledging of shares. What’s the endgame of BELSTAR; is it to merge the operations of uniBank and adb to hold majority stake? I think the Security and Exchange Commission should sit up and probe the operations and nature of dealings by BELSTAR in the financial Market.

5. Consequently, what’s the role of KPMG in the administration of uniBank for six (6) months? Is it limited to just its day to day management or complete restructuring? What will be the repercussion after the 6 (six) months, will the old management assume their respective positions or not? What should be the expectation of shareholders; will they lose their interest in uniBank after the 6 months? These are questions that need answers in the coming days.

It’s interesting times in the financial sector with quasi banking institution such as Microfinance institutions and Investment other institutions also committing even greater offences than the main stream Banks, with about 30 of them hurled before EOCO already.

Must the regulator sit and act only when there is distress in the sector; the agency theory which management has is the duty to act in the best interest of customers (depositors) since they hold their money in trust for operations, the question bothering minds is whether management are withholding information from stakeholders and using it to their advantage.

uniBank, BELSTAR CAPITAL LIMITED AND GOVT. OF GHANA LOVE AFFAIR

In a bid by Unibank to bring its CAR back to the required minimum, it invited Belstar, to help it raise GH¢600 million to shore up its capital to meet the new BoG minimum capital requirement. One would ask, why GH¢600 million when they needed GH¢400 million? This could be attributed to the fact that uniBank was highly illiquid and that it needed the extra ¢200 million to pay off its debts and get back to normal operations. As it is now, it looks like that may never happen.

It brings us back to the earlier question; If uniBank agreed for Belstar to raise GH¢600 million for them to shore up their capital, it only meant Unibank were not in the capacity to meet the new capital requirement, thus it needed the help of Belstar. So, how were they going to buy Belstar out of adb? Well, it now looks like uniBank was never going to buy Belstar out of ADB. In simple terms, uniBank was going to convert what it owed Belstar into shares after they had taken over ADB. After all, that is the agreement Belstar had with uniBank earlier on; we will raise the GH¢600 million for you in return for an equity stake in uniBank.

That brings us again to an earlier question; does government, the Bank of Ghana or the Securities and Exchange Commission (SEC) have any leverage at the moment to block this deal? The most interested party among these three is the government of Ghana especially when the finance minister, Mr. Ken Ofori – Atta announced in his 2018 budget statement to Parliament in November 2017, that the government intended to merge adb and NIB, and rename it the National Development Bank. Thus the government must have been unhappy about Belstar and uniBank’s arrangement.

Well, it looked like BoG was government’s Holy Grail in a different way. I bet nobody saw the appointment of KPMG as administrators for uniBank coming. Since the BoG is always aligned to any sitting govt., the government of Ghana was fully armed with this approach to block such a deal from happening. uniBank had a lot of issues that were not privy to the public, but there were some speculations about them being in bad health in the public domain. Going head to head with the BoG and the government by making some public announcements must have been a bad idea after all.

The effect of efficient market hypothesis on the market will affect stakeholder’s decisions in the financial Sector i.e. citizenry losing confidence and trust in the banking sector with the happenings in the last 8 months.

Corporate communication should be the key in how such information is publicized to prevent negative behaviour reactions from key stakeholders. Deepening corporate governance and strict adherence to compliance of banking regulations by key players should be enforced strongly.
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By: Joshua Asare Date & Yemoh Nii Mensah Benjamin

The post Bank of Ghana; the Gov’t of Ghana’s Holy Grail appeared first on Citi 97.3 FM - Relevant Radio. Always.

According to the Reuters News Agency, management of uniBank is of the view that the BoG did not meet the requirement to notify them before announcing the takeover.

[contextly_sidebar id=”OguAHlKcUd8BMyxDQZdzqEgJKVkUd8Ir”]A legal adviser to uniBank, Dominic Ayine, made known this intent saying “We intend to go for arbitration.”

It is as yet unclear where the bank will pursue this arbitration.

Dr. Ayine has confirmed this decision to Citi News off record, but has refused to give further details.

BoG, KPMG takeover

The Bank of Ghana announced that it had appointed private audit firm KPMG Ghana, as the administrator when it announced it had taken over the management of uniBank.

According to the central bank, it took the decision to save uniBank from collapse.

The BoG in a statement said, KPMG, as the official administrator, will play the key role of assuming control of the bank and all its branches and “carry out the responsibilities of the shareholders, directors, and key management personnel of uniBank.”

It stated that during the period of official administration of uniBank, “the bank will remain open for business under the management and control of KPMG overseen by the Bank of Ghana, and is not being closed and liquidated.”

uniBank was found to have persistently maintained a negative capital adequacy ratio below zero making it technically insolvent.

This contravened the 10% minimum capital adequacy ratio required.

uniBank also suffered liquidity shortfalls and consistently breached its cash reserve requirement.

As a result, uniBank relied extensively on liquidity support of over GHS 2.2 billion from the Bank of Ghana over the past two years to meet its recurring liabilities.

The BoG revealed that uniBank had failed to comply with a directive from the BoG to stop granting new loans whilst also and deliberately concealing some liabilities from its balance sheet.

uniBank also failed to comply with several other regulatory requirements, including lending to a number of borrowers in excess of its regulatory lending limit.

Before all this, uniBank was one of nine banks identified after the asset quality review exercise undertaken in 2016, to be significantly under-capitalized with a capital asset ratio of 4.75%.

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By: Delali Adogla-Bessa/citifmonline.com/Ghana

The post uniBank to challenge takeover by BoG appeared first on Citi 97.3 FM - Relevant Radio. Always.

Dr. Assibey-Yeboah said the appointment of blood relations and friends into executive positions at the expense of competence and the establishment of business lines without the required capacity are some of the key reasons why some local banks are struggling or have collapsed completely.

[contextly_sidebar id=”wuGOjVSW6UcVtg1hGNQZkT8ZdwwlXEv9″]”These are corporate management issues. It is for my father so I am the Managing Director and I am loaning out [Money]. They venture into things. DKM had DKM airport or something. They had cement companies. If you go into a lot of these, [you see that] they had a lot of business that they are not well vexed in,” he told the media in Parliament on Wednesday.

The MP was commenting on the recent insolvency of uniBank, an indigenous bank.

uniBank was found to have persistently maintained a negative capital adequacy ratio below zero making it technically insolvent. This contravened the 10% minimum capital adequacy ratio required.

uniBank also suffered liquidity shortfalls and consistently breached its cash reserve requirement.

As a result, uniBank relied extensively on liquidity support of over GHS 2.2 billion from the Bank of Ghana over the past two years to meet its recurring liabilities.

uniBank’s insolvency followed the total collapse of two other indigenous banks, UT Bank and Capital Bank in August 2017.

UT and Capital Banks were unable to turn around their negative capital adequacy position, which necessitated a Purchase and Assumption agreement allowing GCB Bank to take over all their deposit liabilities and selected assets.

BoG intervention timely

Dr. Assibey-Yeboah, who is a customer of uniBank, said the Bank of Ghana’s (BoG) intervention is apt.

“It is the proper thing because if you are not careful and the bank goes under water, it is liquidated then I would have also lost my deposits at uniBank so what the Bank of Ghana did was the right thing to do.”

The BoG announced KPMG Ghana as uniBank’s administrator when it announced it had taken over the management of the bank. The central bank took the decision to save uniBank from total collapse.

Dr. Assibey-Yeboah said KPMG Ghana was well vexed to save the bank from collapsing within its six-month timeline.

“The administrator [KPMG] will go into the books and go after all the non-performing loans. So in six months, we should see a revival.”

Ailing Microfinance sector

The BoG has also said the problems in the financial sector are also reflected in the Micro Finance sub-sector.

The BoG Governor in a statement noted that the distress in this sub-sector has been characterized by “severely impaired capital; inability to meet regulatory capital adequacy requirement; generally low asset quality; and liquidity crises.”

“These have culminated in threats to depositors’ funds thus eroding public confidence and undermining efforts to promote financial inclusion,” he added.

Using figures to highlight the precarious situation, he said out of the total number of 566 licensed Micro Finance Institutions in 2018, 211 are active but distressed or have folded up.

Also, out of the total number of 141 rural and community banks, 37 are active but distressed or have folded up.

In total, it is estimated that 272 out of the 707 institutions in the sub-sector, representing 38.5%, are at risk.

“This indicates that approximately GHȼ740.5 million is owed to an estimated 705,396 depositors of the distressed or folded up MFIs and RCBs. In terms of significance, the deposits under distress form 8.81% and 52.49% of industry total deposits of RCBs and MFIs respectively.”

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By: Duke Mensah Opoku & Delali Adogla-Bessa/citifmonline.com/Ghana

The post Local banks’ struggles due to poor corporate governance – Assibey-Yeboah appeared first on Citi 97.3 FM - Relevant Radio. Always.

The BoG’s 2nd Deputy Governor of the Bank of Ghana, Elsie Awadzi said the takeover of uniBank is primarily to keep it from collapse.

[contextly_sidebar id=”vWiOA3Ng58tMntECjJAXCXIcfPZ7eNDh”]”We do have information as to violations of the regulatory framework and what we think was done and not done. The purpose of putting an official administrator in place is to get hold of irrefutable evidence that allows us to move forward. It is not the entire objective. The key objective is to save the bank and to turn it around to be a stronger and a better bank,” Elsie Awadzi stated on the Citi Breakfast Show.

She said once the bank’s situation had been stabilised, pursuing possible wrongdoing was still on the table “for the sake of the public trust that is reposed in banks and for the sake of depositors.”

She explained further that information gathered during the takeover will also be key to addressing the failings of the bank’s management.

“On the basis of any such information that we obtain, we will see what the options are for addressing and correcting what has happened in the past. We will involve any other authorities that need to be involved to take up the matter.”

Status of UT Bank and Capital Bank probe

Elsie Awadzie also gave a similar explanation for the probe into whether the activities of the top officials of UT Bank and Capital Bank led to the collapse of the two financial institutions in August 2017.

UT Bank and Capital Bank were unable to turn around their negative capital adequacy position, which necessitated a Purchase and Assumption agreement allowing GCB Bank to take over all their deposit liabilities and selected assets.

According to her, once the takeover of the two banks was confirmed, the BoG immediately began working towards ensuring that the assets of the banks were secure.

“In the case of UT Bank and Capital Bank we were winding up those banks and the first order of business was to immediately lay hands on assets to be able to recover value and take them back,” she said.

She added that the management of BoG has proceeded to investigate the top management of the banks and would finalize the reports in due time.

Review of supervisory framework

The BoG revealed that uniBank had failed to comply with a directive from the BoG to stop granting new loans whilst also and deliberately concealing some liabilities from its balance sheet.

uniBank also failed to comply with several other regulatory requirements, including lending to a number of borrowers in excess of its regulatory lending limit.

Before all this, uniBank was one of nine banks identified after the asset quality review exercise undertaken in 2016, to be significantly undercapitalized with a capital asset ratio of 4.75%.

The state of uniBank ahead of its takeover called into question the monitoring capabilities of the BoG.

Elsie Awadzi responded to this by saying the BoG was going to review its supervisory framework.

“We as new management of the Bank of Ghana are taking steps to review our entire supervisory and lending framework and liquidity support framework. We are taking steps to make sure the system is not exploited and that it is a framework that is resilient, that it is a framework that has integrity and that it is a framework that is not abused by the market.”

BoG, KPMG takeover

The Bank of Ghana announced KPMG Ghana as the administrator when it announced it had taken over the management of uniBank.

According to the central bank, it took the decision to save uniBank from collapse.

The BoG in a statement said KPMG as Official Administrator will play the key role of assuming control of the bank and all its branches and “carry out the responsibilities of the shareholders, directors, and key management personnel of uniBank.”

It stated that during the period of official administration of uniBank, “the bank will remain open for business under the management and control of KPMG overseen by the Bank of Ghana, and is not being closed and liquidated.”

uniBank was found to have persistently maintained a negative capital adequacy ratio below zero making it technically insolvent.

This contravened the 10% minimum capital adequacy ratio required.

uniBank also suffered liquidity shortfalls and consistently breached its cash reserve requirement.

As a result, uniBank relied extensively on liquidity support of over GHS 2.2 billion from the Bank of Ghana over the past two years to meet its recurring liabilities.

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By: Delali Adogla-Bessa/citifmonline.com/Ghana

The post We’ll save uniBank first, probe management later – BoG appeared first on Citi 97.3 FM - Relevant Radio. Always.

Commenting on the BoG’s takeover of uniBank, the 2nd Deputy Governor of the Bank of Ghana, Elsie Awadzi, said the public need not fear for the collapse of more banks.

[contextly_sidebar id=”ITcwxTmplDpfX8o7KCu6wei9lMFuMsFT”]“The public should remain calm. There are no problems anywhere else other than what we know about already,” she stated on the Citi Breakfast Show.

“I’d like to reiterate the fact that banking sector is strong, sound and safe. The public need not worry or panic. Everything is fine. We encourage everyone to be calm and continue normal banking operations with all the banks. The banks are fine.”

uniBank’s insolvency follows the total collapse of UT Bank and Capital Bank in August 2017.

The latter two were unable to turn around their negative capital adequacy position, which necessitated a Purchase and Assumption agreement allowing GCB Bank to take over all their deposit liabilities and selected assets.

uniBank’s problems

uniBank was one of nine banks identified after the asset quality review exercise undertaken in 2016, to be significantly undercapitalized with a CAR of 4.75%.

The Central Bank indicated that uniBank’s problems were part of the legacy issues in the financial sector attributed to weak economic growth and poor corporate governance and risk management practices.

Elsie Awadzi noted that though uniBank was “severely undercapitalised” it had submitted a satisfactory roadmap to get back on track, hence the BoG’s indulgence.

But when it became clear the bank’s situation was getting worse, the BoG had to step in to save it from an outright collapse.

Aside from all this, uniBank had failed to comply with a directive from the BoG to stop granting new loans whilst also and deliberately concealing some liabilities from its balance sheet.

Despite these failings, Elsie Awadzi said the other banks cited in the review exercise are doing fine and were under strict monitoring to prevent similar occurrences.

“The other banks were fine. They all submitted their capital plans, their liquidity plans and they are all being implemented and we have no concerns with any of those. So everything is fine. We then began to put them under stronger surveillance to ensure that they were doing the right things as they had committed to do… we have checked the other banks under strong monitoring and we have no cause to believe that any other numbers were not right.”

The takeover

The BoG appointed audit firm KPMG Ghana as the administrator of uniBank when it announced it had taken over  management.

The BoG in a statement said KPMG as Official Administrator will play the key role of assuming control of the bank and all its branches and “carry out the responsibilities of the shareholders, directors, and key management personnel of uniBank.”

It stated that during the period of official administration of uniBank, “the bank will remain open for business under the management and control of KPMG overseen by the Bank of Ghana, and is not being closed and liquidated.”

uniBank was found to have persistently maintained a negative capital adequacy ratio below zero making it technically insolvent.

This contravened the 10% minimum capital adequacy ratio required.

uniBank also suffered liquidity shortfalls and consistently breached its cash reserve requirement.

As a result, uniBank relied extensively on liquidity support of over GHS 2.2 billion from the Bank of Ghana over the past two years to meet its recurring liabilities.

–

By: Delali Adogla-Bessa/citifmonline.com/Ghana

The post Banking sector still strong despite uniBank takeover – BoG appeared first on Citi 97.3 FM - Relevant Radio. Always.

As the story unfolds, here are 10 points to keep note of, including the fact that uniBank failed to comply with a directive of the Bank of Ghana to stop granting new loans, and that the bank deliberately concealed some liabilities from its balance sheet.

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By: citifmonline.com/Ghana

The post 10 things to know about the uniBank takeover [Infographic] appeared first on Citi 97.3 FM - Relevant Radio. Always.

The suggestions follow the Bank of Ghana’s decision to allow KPMG takeover the management of uniBank over their low capital levels.

It is unclear what sanctions the central bank could apply of uniBank fails to restore its operations to meet regulatory standards after the six months’ period.

Meanwhile, the industry regulator has assured customers that their deposits would be protected throughout the exercise.

Click to listen to the full audio report.

–

By: Pius Amihere Eduku/citibusinessnews.com/Ghana

The post uniBank takeover: Analyst urges audit of banks’ risks to loan default   appeared first on Citi 97.3 FM - Relevant Radio. Always.

“The Bank of Ghana takes this opportunity to reassure customers of UniBank that all deposits they have with UniBank are, and will remain safe, and that they can continue to do business at any of its branches,” BoG said in a statement.

[contextly_sidebar id=”nWrXjiMsS09IBrYP2ihuewosYXx5pYRP”]The Central Bank at a press conference held earlier today [Tuesday], announced that it had appointed KPMG as administrator of uniBank since it had become insolvent.

The Governor of the Bank of Ghana, Dr. Ernest Addison, explained that the decision was to save the bank from collapse.

The BoG in a statement said KPMG as Official Administrator will play the key role of assuming control of the bank and all its branches and “carry out the responsibilities of the shareholders, directors, and key management personnel of UniBank.”

It stated that during the period of official administration of UniBank, “the bank will remain open for business under the management and control of KPMG overseen by the Bank of Ghana, and is not being closed and liquidated.”

Unibank’s purported takeover

This takeover comes on the back of a purported control of the Agricultural Development Bank (adb) by Unibank weeks ago.

There were reports that uniBank had taken over adb after four shareholders of the development bank; comprising Belstar Capital, Starmount Development company, EDC and SIC Financial Services Limited, pledged their shares, proceeds, entitlements and voting rights to uniBank.

The Chief Executive Officer of uniBank, Dr. Kwabena Duffour Jr. later told Citi News that uniBank had control over adb and that the move was in the best interest of the banking industry.

This was however followed by a u-turn from uniBank, after adb was suspended by the Ghana Stock Exchange and the Bank of Ghana announced that it had not approved a purported takeover.

adb also came out to deny media reports that uniBank had taken over its operations.

UT , Capital Bank takeover

In 2017, the BoG similarly granted GCB Bank permission to take over UT Bank and Capital Bank after they were unable to increase their cash requirement need for their banking operations.

Below is the Bank’s statement on the uniBank takeover 

In exercise of its powers under Sections 107 and 108 of the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930) the Bank of Ghana has, effective today 20th March 2018, appointed KPMG as Official Administrator for uniBank Ghana Limited (uniBank).

Section 107 of Act 930 empowers the Bank of Ghana to appoint an Official Administrator to take official control of a bank when its capital adequacy ratio (CAR) has fallen below 50% of the required minimum of 10% (i.e. below 5%).

Under section 108 of Act 930, the Official Administrator is authorized to exercise a variety of powers to rehabilitate and return the bank to regulatory compliance within a period of six months, at the end of which the bank will be returned to private ownership and management.

The appointment by the Bank of Ghana of the official administrator is aimed at saving UniBank from imminent collapse. It will prevent potential losses to depositors and other creditors, and ensure that the financial condition of the bank does not create further risks for the entire financial system.

KPMG as Official Administrator will assume control of the bank and all its branches and carry out the responsibilities of the shareholders, directors, and key management personnel of UniBank with effect from today. In line with its powers under Act 930, KPMG will ascertain the state of the bank’s assets and liabilities, and exercise a variety of powers under Act 930 to rehabilitate and return the bank to regulatory compliance and viability within a period of six months, at the end of which the bank will be returned to private ownership and management.

During the period of official administration of UniBank, the bank will remain open for business under the management and control of KPMG overseen by the Bank of Ghana, and is not being closed and liquidated.

UniBank’s problems are part of the legacy issues in the financial sector attributed to weak economic growth and poor corporate governance and risk management practices.

It will be recalled that UniBank was one of nine banks identified after the asset quality review exercise undertaken in 2016, to be significantly undercapitalized with a CAR of 4.75%.

As part of efforts to recapitalize the bank, it submitted capital restoration plans to the Bank of Ghana which it implemented to build up its capital to 7.7% in August 2017. Subsequent reviews of UniBank’s books by Bank of Ghana’s supervision teams showed that the bank had not reported the state of its loan book accurately.

Consequently, by October 2017, its CAR was estimated at negative 12.5 %, making it technically insolvent. By December 2017, its CAR had dropped further to negative 24%.

The bank has failed to submit its monthly returns to the Bank of Ghana for January and February 2018, and as a result Bank of Ghana has no evidence to suggest that its CAR has been restored to the regulatory minimum of 10%.

Efforts made by Bank of Ghana’s supervisory teams who have visited the bank’s head office several times this month to obtain current information on the bank’s financial health, proved futile as the bank’s management failed to cooperate with the Bank of Ghana staff on site.

The appointment of the Official Administrator has therefore become necessary due to the fact that uniBank has, among other things:

1. a) Persistently maintained a capital adequacy ratio (CAR) below zero (currently negative 24%), making it technically insolvent. This contravenes section 29 of Act 930 which requires a minimum CAR of 10% to be maintained at all times.
2. b) Persistently suffered liquidity shortfalls and consistently breached its cash reserve requirement. As a result, UniBank has relied extensively on liquidity support (over GHS 2.2 billion) from the Bank of Ghana over the past two years to meet its recurring liabilities. Among other things, a key shareholder of the bank managed to obtain liquidity support from the Bank of Ghana using third party banks as its agents. The Bank of Ghana’s exposure to the bank was therefore underestimated by nearly GHS 400 million, as this amount was not reflected in its books.
3. c) Conducted its credit administration in a manner that has jeopardized the interests of depositors and the financial sector as a whole.
4. d) Failed to comply with a directive of the Bank of Ghana dated 26th October, 2017 under section 105 of Act 930, prohibiting the bank from granting new loans and incurring new capital expenditures.
5. e) Failed to comply with several other regulatory requirements, including:

• Lending to a number of borrowers in excess of its regulatory lending limit (single obligor limit) under section 62 of the Banks and SDIs Act, 2016 (Act 930);
• Borrowing from the inter-bank market without the written approval of the Bank of Ghana when its CAR was less than the prescribed ten percent (10%), in breach of section 66(1) of Act 930.
• Outsourcing a number of services such as those of tellers, receptionists, and security, to affiliate companies without the prior approval by the Bank of Ghana, contrary to section 60 (12) of Act 930.
• Refusing to cooperate with the Bank of Ghana in the performance of its supervisory responsibilities, including deliberately concealing some liabilities from its balance sheet, and failing to submit documents and records for supervisory inspection.
• Poor corporate governance and risk management practices which rendered the bank vulnerable to macroeconomic shocks.
• Generally conducting its affairs in a manner detrimental to the interests of depositors and the financial system as a whole.

In spite of the Ministry of Finance recently agreeing to absorb a significant amount of the debts of Government contractors owed to the bank to the tune of ¢428,817,961 (backed by Interim Payment Certificates issued to contractors), the bank has not been able to address its capital deficiency, which has continued to deteriorate.

Also, the bank engaged in significant transactions with its parent company and affiliate companies including connected lending and other related party transactions without sufficient controls as required by law.

Allowing the continuation of UniBank’s activities in their current form would be detrimental to the interests of depositors and the banking system as a whole.

Several attempts by the Bank of Ghana to work together with management and shareholders of the bank to address the capital deficiency and liquidity challenges have failed to achieve the desired outcome, making the continuous reliance on Bank of Ghana for liquidity support unsustainable.

More recently, the bank’s announcement of a purported pledge of ADB Bank shares in its favour by its shareholders to secure commitments for recapitalization, were deemed by the Bank of Ghana to be null and void as no prior approval had been obtained from the Bank of Ghana as required by Act 930 for acquiring significant shares in a bank or exercising other forms of control by virtue of any transaction.

In any event, a request by the Bank of Ghana to the bank to submit copies of the Deed of Pledge and underlying transactional documents were not heeded by uniBank, its shareholders, directors, or management.

Furthermore, there are additional regulatory hurdles outside the control of the Bank of Ghana required to be cleared by UniBank before potentially realizing any value, if at all, from the said transaction, making it incapable of addressing the immediate capital and liquidity needs of the bank.

The Bank of Ghana takes this opportunity to reassure customers of UniBank that all deposits they have with UniBank are, and will remain, safe and that they can continue to do business at any of its branches.

NO DEPOSITOR OF THE BANK WILL LOSE ANY MONEY.

Bank of Ghana remains committed to supporting the orderly development of Ghana’s banking sector including indigenous Ghanaian banks, while promoting a strong and resilient sector to drive Ghana’s economic growth.

Kindly direct any questions to Bank of Ghana. You may call telephone number 0302665034 or send email to [email protected].

–

By: Marian Ansah/citifmonline.com/Ghana

The post uniBank takeover: Deposits are safe – BoG appeared first on Citi 97.3 FM - Relevant Radio. Always.

According to the central bank, it took the decision to save uniBank from collapse.

Here are the 10 major reasons why the central bank took over uniBank.

1. uniBank persistently maintained a capital adequacy (CAR) ratio below zero (currently negative 24%), making it technically insolvent. This contravened the 10% minimum CAR required.

2. uniBank suffered liquidity shortfalls and consistently breached its cash reserve requirement. As a result, UniBank relied extensively on liquidity support of over GHS 2.2 billion from the Bank of Ghana over the past two years to meet its recurring liabilities.

3. uniBank conducted its credit administration in a manner that has jeopardized the interests of depositors and the financial sector as a whole.

4. uniBank failed to comply with a directive of the Bank of Ghana dated 26th October, 2017, under section 105 of Act 930, prohibiting the bank from granting new loans and incurring new capital expenditures.

5.uniBank failed to comply with several other regulatory requirements, including  Lending to a number of borrowers in excess of its regulatory lending limit (single obligor limit).

6. uniBank was borrowing from the inter-bank market without the written approval of the Bank of Ghana when its CAR was less than the prescribed ten percent (10%), in breach of the BoG laws.

7. uniBank was outsourcing a number of services such as those of tellers, receptionists, and security, to affiliate companies without the prior approval by the Bank of Ghana, contrary to BoG Laws.

8. uniBank refused to cooperate with the Bank of Ghana in the performance of its supervisory responsibilities, including deliberately concealing some liabilities from its balance sheet, and failing to submit documents and records for supervisory inspection.

9. uniBank was engaged in poor corporate governance and risk management practices which rendered the bank vulnerable to macroeconomic shocks.

10. uniBank was generally conducting its affairs in a manner detrimental to the interests of depositors and the financial system as a whole.

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By: Lawrence Segbefia/citibusinessnews.com/Ghana

The post Here are 10 reasons why BoG took over uniBank appeared first on Citi 97.3 FM - Relevant Radio. Always.

This means that the central bank has taken over the assets and management of uniBank.

[contextly_sidebar id=”UqhOajNahE2Mi6N48T37jhpju9I1GgpS”]The Governor of the Bank of Ghana, Dr. Ernest Addison, says uniBank is currently insolvent.

Addressing a press conference in Accra, Dr. Ernest Addison stated that, KPMG has been appointed to manage the bank to save it from collapse.

Citi Business News’ Lawrence Segbefia reports that the central bank has ordered the management of uniBank to step aside and allow the new entity, KPMG assume the management of the bank.

He also added that, the central bank had indicated that uniBank’s capital has not been close to the 400 million cedis minimum requirement expected of commercial banks by December 2018.

The announcement comes two weeks after uniBank announced a purported takeover of adb after some shareholders of the latter, pledged their shares in the bank.

The BoG at the time, dismissed the reports explaining that it has not approved any such agreement.

The CEO of uniBank, Dr. Kwabena Duffour Junior told Citi Business News that uniBank is set to assume a controlling interest in ADB after a consortium of shareholders pledged their shares, proceeds, entitlement and voting rights to Unibank.

Below is the full statement from BoG announcing the takeover

BANK OF GHANA APPOINTS OFFICIAL ADMINISTRATOR FOR UNIBANK GH LTD

Accra, Ghana, March 20, 2018- In exercise of its powers under Sections 107 and 108 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) the Bank of Ghana has, effective today 20th March 2018, appointed KPMG as Official Administrator for UniBank Ghana Limited (UniBank).

Section 107 of Act 930 empowers the Bank of Ghana to appoint an Official Administrator to take official control of a bank when its capital adequacy ratio (CAR) has fallen below 50% of the required minimum of 10% (i.e. below 5%). Under section 108 of Act 930, the Official Administrator is authorized to exercise a variety of powers to rehabilitate and return the bank to regulatory compliance within a period of six months, at the end of which the bank will be returned to private ownership and management.

The appointment by the Bank of Ghana of the official administrator is aimed at saving UniBank from imminent collapse. It will prevent potential losses to depositors and other creditors, and ensure that the financial condition of the bank does not create further risks for the entire financial system.

KPMG as Official Administrator will assume control of the bank and all its branches and carry out the responsibilities of the shareholders, directors, and key management personnel of UniBank with effect from today. In line with its powers under Act 930, KPMG will ascertain the state of the bank’s assets and liabilities, and exercise a variety of powers under Act 930 to rehabilitate and return the bank to regulatory compliance and viability within a period of six months, at the end of which the bank will be returned to private ownership and management.

During the period of official administration of UniBank, the bank will remain open for business under the management and control of KPMG overseen by the Bank of Ghana, and is not being closed and liquidated.

UniBank’s problems are part of the legacy issues in the financial sector attributed to weak economic growth and poor corporate governance and risk management practices.

It will be recalled that UniBank was one of nine banks identified after the asset quality review exercise undertaken in 2016, to be significantly undercapitalized with a CAR of 4.75%.

As part of efforts to recapitalize the bank, it submitted capital restoration plans to the Bank of Ghana which it implemented to build up its capital to 7.7% in August 2017. Subsequent reviews of UniBank’s books by Bank of Ghana’s supervision teams showed that the bank had not reported the state of its loan book accurately.

Consequently, by October 2017, its CAR was estimated at negative 12.5 %, making it technically insolvent. By December 2017, its CAR had dropped further to negative 24%.

The bank has failed to submit its monthly returns to the Bank of Ghana for January and February 2018, and as a result Bank of Ghana has no evidence to suggest that its CAR has been restored to the regulatory minimum of 10%.

Efforts made by Bank of Ghana’s supervisory teams who have visited the bank’s head office several times this month to obtain current information on the bank’s financial health, proved futile as the bank’s management failed to cooperate with the Bank of Ghana staff on site.

The appointment of the Official Administrator has therefore become necessary due to the fact that uniBank has, among other things:

a) Persistently maintained a capital adequacy ratio (CAR) below zero (currently negative 24%), making it technically insolvent. This contravenes section 29 of Act 930 which requires a minimum CAR of 10% to be maintained at all times.

b) Persistently suffered liquidity shortfalls and consistently breached its cash reserve requirement. As a result, UniBank has relied extensively on liquidity support (over GHS 2.2 billion) from the Bank of Ghana over the past two years to meet its recurring liabilities. Among other things, a key shareholder of the bank managed to obtain liquidity support from the Bank of Ghana using third party banks as its agents. The Bank of Ghana’s exposure to the bank was therefore underestimated by nearly GHS 400 million, as this amount was not reflected in its books.

c) Conducted its credit administration in a manner that has jeopardized the interests of depositors and the financial sector as a whole.

d) Failed to comply with a directive of the Bank of Ghana dated 26th October, 2017 under section 105 of Act 930, prohibiting the bank from granting new loans and incurring new capital expenditures.

e) Failed to comply with several other regulatory requirements, including:

Lending to a number of borrowers in excess of its regulatory lending limit (single obligor limit) under section 62 of the Banks and SDIs Act, 2016 (Act 930);

Borrowing from the inter-bank market without the written approval of the Bank of Ghana when its CAR was less than the prescribed ten percent (10%), in breach of section 66(1) of Act 930.

Outsourcing a number of services such as those of tellers, receptionists, and security, to affiliate companies without the prior approval by the Bank of Ghana, contrary to section 60 (12) of Act 930.

Refusing to cooperate with the Bank of Ghana in the performance of its supervisory responsibilities, including deliberately concealing some liabilities from its balance sheet, and failing to submit documents and records for supervisory inspection.

Poor corporate governance and risk management practices which rendered the bank vulnerable to macroeconomic shocks.

Generally conducting its affairs in a manner detrimental to the interests of depositors and the financial system as a whole.

In spite of the Ministry of Finance recently agreeing to absorb a significant amount of the debts of Government contractors owed to the bank to the tune of ¢428,817,961 (backed by Interim Payment Certificates issued to contractors), the bank has not been able to address its capital deficiency, which has continued to deteriorate.

Also, the bank engaged in significant transactions with its parent company and affiliate companies including connected lending and other related party transactions without sufficient controls as required by law.

Allowing the continuation of UniBank’s activities in their current form would be detrimental to the interests of depositors and the banking system as a whole.

Several attempts by the Bank of Ghana to work together with management and shareholders of the bank to address the capital deficiency and liquidity challenges have failed to achieve the desired outcome, making the continuous reliance on Bank of Ghana for liquidity support unsustainable.

More recently, the bank’s announcement of a purported pledge of ADB Bank shares in its favour by its shareholders to secure commitments for recapitalization, were deemed by the Bank of Ghana to be null and void as no prior approval had been obtained from the Bank of Ghana as required by Act 930 for acquiring significant shares in a bank or exercising other forms of control by virtue of any transaction.

In any event, a request by the Bank of Ghana to the bank to submit copies of the Deed of Pledge and underlying transactional documents were not heeded by uniBank, its shareholders, directors, or management.

Furthermore, there are additional regulatory hurdles outside the control of the Bank of Ghana required to be cleared by UniBank before potentially realizing any value, if at all, from the said transaction, making it incapable of addressing the immediate capital and liquidity needs of the bank.

The Bank of Ghana takes this opportunity to reassure customers of UniBank that all deposits they have with UniBank are, and will remain, safe and that they can continue to do business at any of its branches. NO DEPOSITOR OF THE BANK WILL LOSE ANY MONEY.

Bank of Ghana remains committed to supporting the orderly development of Ghana’s banking sector including indigenous Ghanaian banks, while promoting a strong and resilient sector to drive Ghana’s economic growth.

Kindly direct any questions to Bank of Ghana. You may call telephone number 0302665034 or send email to [email protected].

Issued

By: Secretary’s Department.

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By: Lawrence Segbefia/Pius Amihere Eduku/citibusinessnews.com/Ghana

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