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Bank Failures And Regulatory Inertia In Ghana : The Blame Game Commences

Bank Failures And Regulatory Inertia In Ghana : The Blame Game Commences
The Function of this text is to stipulate the debilitating difficulty of lack of company governance and regulatory supervision and enforcement inside the banking sector in Ghana during the last decade (Between January 2009 to January 2019).
The most important import is to get the timeline of points within the banking sector, conduct table-top root trigger evaluation and to proffer options in enhancing a strong company governance and danger administration regime.
The NDC Years January 2000 
The first time I heard of the collapse of a financial institution in Ghana was that of two state banks in January 2000 When the erstwhile state banks, Bank for Housing and Development and the Cooperative Bank Ghana collapsed following heavy losses[1]. Causes assigned on the time for his or her demise was that the three state banks specifically Ghana Business Bank, Bank for Housing and development (BHC) and Ghana Cooperative Bank (C B) had loaned colossal quantities to an excellent market chain, to the tune of 120 billion cedis. The change price on the time was $1- 4200 cedis.[2] ($28 -29 Million dollars).
Based on Critical Fraud Workplace report on the time, there was collusion between the administration of the three banks and that of the tremendous market chain.[3] Based on an article in modernghana.com,[4]most political watchers at there have been allegations that a few of the funds have been used to fund political actions, and bulk of withdrawals have been made through the run-up to the December 1996 elections.[5]Somebody could also be asking, why is that this author taking place reminiscence lane? The reply to this query is straightforward. Through the years, There was a scarcity of company governance and danger evaluation in banks in Ghana. And the central financial institution appears to be on the mercy of the political Management.
The NDC Years January 2009 to December 2016
It ought to be instructive to notice that a lot of the banking crises dealing with Ghana, had its offshoot in the course of the interval when a specific celebration was in energy from 2010 to December 2016.
The difficulty of Bank collapse and lack of supervision has once more reared its ugly head.
In 2017, The Bank of Ghana revoked the licenses of two banks specifically: Capital Bank, UT Bank. The Ghana Business Bank did an asset buy of those two banks and absorbed the deposits of those banks.
The Central banks report of those 2 banks, recognized a string of Company governance lapse.
The rot, in line with reviews began proper from the time these two banks got their banking licenses. These two banks began of as micro finance corporations; within the case of Capital Bank, it was granted provisional license in 2012, and full license in December 2013.
UT Bank, then again turned absolutely operational in 2009[6], and was listed on the Ghana inventory trade in 2010.[7]Capital adequacy and associated celebration transactions have been cited as resulting in the collapse of UT and Capital Bank.
Anecdotal proof on social media portended a really worrying development.
The board chairman, after the demise of the Bank, asserted that he couldn’t be blamed since he was not a part of the day-day administration of the financial institution.
This to me is worrying, it appears the gatekeepers of our financial savings and hard-earned money aren’t even. Conscious of their fiduciary duties as board chairmen. Some years prior, this similar individual had intimate that “banking was easy it was just debit and credit”. [8]Additional extra, within the case of UT financial institution ( a listed firm) it had sure duties and obligations.
It had compliance obligations they needed to deal with specifically: with the Central financial institution ( its main regulator as a financial institution). It additionally needed to cope with regulatory provisions of SEC which was the Itemizing authority, and the Ghana Inventory Trade’s Itemizing guidelines.
It failed to stick to its regulatory obligations. For years, had did not file an audited Annual Report back to the central financial institution and SEC. These infractions breached the banks itemizing obligations to the Ghana Inventory Trade, its shareholders in addition to the Bank of Ghana’s prudential and supervision regime.
Dangerous company governance was cited as a causative issue for the demise of UT Bank and Capital Bank as well as problems with capital adequacy. Administration and board members have been linked to a collection of associated social gathering transaction in violation of Banking legal guidelines in Ghana.
There been reviews and allegations that sure a corporations and iindividuals with political connections have been indebted to UT financial institution to the tune of GHC 302 million.
And these loans have been superior to the outfit with out following the right procedures. [9]The NPP Years: A Legacy of cleansing -up NDC laxity.
The document books present that through the regime of J.A Kufuor from January 2001 to January 2009, Ghana didn’t expertise any extreme banking disaster, resulting in the collapse of any financial institution.
There was speak of the state divesting itself from Ghana Business Bank (GCB) and at one other level the identical concept was mooted for Agricultural improvement financial institution. There have been road protests within the case of ADB by civil society organisations. As of the date of this write up, these entities nonetheless stay majority state managed.
Unibank included in 1999, collapsed in 2018 and associated get together transactions., have been cited once more as an element, resulting in its demise. Shareholders and associated events had drawn an quantity of GHC 5.three Billion, which was about 75% of the banks complete belongings.[10]Over 83% of UniBank loans have been non-performing. Mortgage and advances to clients had been overstated , in line with (https://thebftonline.com/2018/features/poor-corporate-governance-and-the-collapse-of-banks/).
In the case of Royal Bank, which began operations as a financial institution in 2012, it had all the time confronted liquidity points proper from its inception. It had poor liquidity controls in addition to liquidity danger administration.
Sovereign financial institution was arrange in January 2016 through the time of the NDC authorities, and the financial institution even did not publish its annual report in December 2017. Throughout investigations by the Central financial institution, it was came upon that it had governance and capital challenges.[11]All these banks, it must be talked about had their points previous to the NPP authorities in January 2017. And collapsed through the NPP regimes home cleansing train. So, the majority of the blame must be levelled towards the NDC regimes lack of oversight and enforcement.
Along with Unibank, their license was revoked by the Bank of Ghana and a brand new financial institution was arrange instead in 2018, often known as Consolidated Bank.
Beige financial institution was December 2017, subsequent investigation, delivered to mild problems with fraud. The financial institution in accordance with the Bank of Ghana, had violated regulatory provisions through the use of funds lodged with an affiliate firm as a part of its seed capital.
Development financial institution was given banking license in Might 2017, and began operations in full swing in December 2017. Through the winding down of Unibank, it got here to mild that a lot of the Paid-up capital of development financial institution was loans it had contracted from Nationwide funding financial institution and Unibank which violated Act 930. And the central financial institution famous that about GHC 80 Million was inaccessible by the financial institution to assist in its operations.
Once more, the operating theme cited for the collapse was Danger administration, poor company governance and poor banking supervision.
In phrases of administration of the monetary sector, the present NPP authorities has collapsed 2 banks established from the time once they took energy in January 2017 specifically Beige, Development.
This isn’t to say that the NPP is above board when it comes to banking supervision and enforcement.
Close to Beige and Development Bank, the query, is why they have been granted Licenses within the first place.
The case of Heritage Bank is a creating problem, so it is going to be disregarded of this dialogue for now. It was a solvent financial institution; its license has been revoked as a consequence of a suspicion of the supply of funds for establishing the financial institution.
Menzgold Saga and Banking and Regulatory failures.
It must be famous that Menzgold began operations in 2014 and began off as Menzbank and was warned by the central financial institution to vary its identify. it modified to develop into Menzbanc and was warned once more. And it turned notorious as Menzgold.
From 2014 until 2017, this personal firm was taking Gold deposits, ‘collectibles’ and was paying month-to-month ‘dividends’ of 7-10%.
Personal corporations as per the legal guidelines of Ghana, aren’t entitled to obtain deposits from the general public. The registrar common ought to have shut this firm down in 2014, when its actions turned recognized.
The Bank of Ghana also needs to had alerted different state our bodies like EOCO, and FIC to freeze the accounts of this firm.
The similar must be stated of SEC, the y ought to have clamped down on the actions of this firm because it was paying dividends and dealing in derivates. However nothing was carried out since its operations commenced in 2014.
Minerals fee had granted it license to buy and export gold from small scale miners, but studies exhibits that, it had solely exported nearly $three Million value of gold, in accordance with Occupy Ghana.
It was not till September 2018, that it was suggested by the SEC to cease taking in new clients, did this firm start to endure setbacks. Newspaper reviews now present that the primary principal of Menzgold has simply been arrested in Dubai, after having jumped bail. This can be a creating story so not a lot might be stated of it, as details will change additional time
Even , as we converse, the lawyer common and registrar common’s division are but to begin the method of liquidation of Menzgold.
The operating theme on this piece is one among Non-payment of loans, political interference on the a part of the NDC, associated social gathering transactions, Shareholder interference, Lack of oversight, poor company governance in addition to Lack of banking and regulatory supervision.
A lot of the Banking points which were recognized, occurred in the course of the NDC years, and NPP are having to wash the mess.
Nevertheless, NPP are also accountable for his or her inertia in arresting the Menzgold concern proper from taking up energy in January 2017.
In case of distressed banks, at the very least they’ve achieved a superb job in preserving buyer deposits in GCB and the newly set-up consolidated financial institution.
We should always point out that, Most Ponzi schemes like Pyram in 1995 and Menzgold in 2014, began throughout NDC regimes. Additionally, DKM, God is love amongst others have been licensed and controlled entities underneath Bank of Ghana, but additionally they promised astronomical Curiosity and returns, and needed to be closed.
In phrases of governance and supervision of Ghana’s banking system NPP are higher than NDC, however solely simply.
As regards to this Menzgold difficulty, a former deputy minister of finance has laid the blame on the door step of the present management of the Bank of Ghana.
He alleges that the Bank of Ghana lacks f management and judgement in not curbing and shutting down Menzgold.
Sadly this similar individual was a deputy minister of finance. And his ministry, truly supervised the “ clueless” Bank of Ghana, whom, he’s blaming for the lapses within the Menzgold affair.
On the NPP aspect of issues, they’re nonetheless unsure, the difficulty whether or not challenge of Menzgold and reimbursement of consumers is a contractual challenge, between the entity and its members, or that it is a matter of inept regulation.
An official of the Central Bank was heard on the radio that her outfit is innocent relating to the Menzgold saga.
Central Bank and regulatory failures, are so critical that, the minister if finance, in an tackle to Ghana’s parliament, even alluded to individuals working on the Central Bank, ministry of finance, members of Parliament and safety businesses being members to the Menzgold scheme.
I’m of the opinion that there ought to be a public enquiry. And the general public must be educated on the nuances of investments and monetary crime.
Additionally this public enquiry will give the general public and celebrities the prospect to inform their story, on how they received themselves to forestall Future occurrences.
For Ghana to have a strong and compliant Banking sector, the rules of company governance and danger administration ought to be enshrined into regulation. And administrators and principals of entities which collapse (not simply banks however Public our bodies additionally) must be banned for all times.
Moreover, the administrators and managers of Corporations each private and non-private ought to be made to bear authorization and certification earlier than they begin operations, they usually have to be periodically re-certified.
A strong tradition of enforcement ought to be the order of the day and there ought to be a political will to stick to such.
Written by Kwadwo Kusi-Frimpong, 10 January 2018, a Monetary crime, Governance and Regulatory Skilled, who has in depth Expertise working with banks and monetary establishments in UK and Switzerland.
Dissertation – on monetary crime, Prevention and Enforcement in UK in 2015.
Dissertation – On Brexit and the impression of on UK banks in 2017
Author holds a Bachelor of Arts Diploma (Philosophy and Political Science) College of Ghana, 2006

Graduate Diploma in Regulation , 2010 and LLM and Authorized Follow Course , 2015 – College of Regulation, UK
Previously referred to as School of Regulation (https://www.law.ac.uk and https://en.m.wikipedia.org/wiki/University_of_Law)
Publish Graduate Diploma in Monetary Technique, Stated Enterprise Faculty – College of Oxford, 2017

[1] https://www.ghanaweb.com/GhanaHomePage/NewsArchive/Government-Closes-Down-Two-State-Owned-Banks-9376
[2] https://www.ghanaweb.com/GhanaHomePage/features/The-Falling-Cedi-Is-it-a-Paper-Tiger-or-Toilet-Paper-19676
[3] https://www.modernghana.com/news/401098/looting-and-raping-ghana-the-case-of-ndc-and-npp-part-1.html
[4] Ibid three
[5] Ibid three.
[6] https://allafrica.com/stories/200905060985.html
[7] https://allafrica.com/stories/201006170996.html
[8] https://www.ghanaweb.com/GhanaHomePage/NewsArchive/Flashback-Banking-is-not-that-tough-it-s-just-commonsense-Otabil-679070
[9] https://www.pulse.com.gh/ece-frontpage/financial-crisis-how-ibrahim-mahamas-ghc302m-debt-collapsed-ut-bank/1zseqdp
[10] https://thebftonline.com/2018/features/poor-corporate-governance-and-the-collapse-of-banks/

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