The fate of six local banks (names
withheld) hangs in the balance after the takeover of uniBank by the Bank of
Ghana (BoG) on Tuesday.
The Central Bank, it would be
recalled, hinted that as many as nine banks (two foreign-owned) were facing
liquidity challenges after conducting a survey in the banking industry some
time ago.
Even though the Central Bank gave
the affected banks time to put their house in order and chart a clean path, the
financial institutions failed to take advantage of the opportunity until
reality started dawning on them.
As a result of that, two distressed
financial institutions – UT Bank, a listed company, and Capital Bank owned by
Ato Essien, who has been linked to other deals in the financial sector – were
taken over by GCB Bank.
On Tuesday, KPMG was appointed by
the Bank of Ghana as an official administrator to manage uniBank for six months
after which it would return to private management.
Analysts believe that allowing the
directors of the collapsed banks to go scot-free without any serious sanction
would not instill discipline in the financial sector.
In July last year, the Central Bank
gave the nine ailing banks until September 2017 to improve their financial
position and reporting.
The financial crisis started in
2015, with some analysts blaming it on the premature exit of Dr Henry Wampah as
Governor of BoG.
A careful look at the Central Bank’s
statistical bulletin – which gives details of the Bank of Ghana’s expenditure
in a financial year – showed that the support extended to the banks shot up
significantly in August 2014.
The bank’s line item of Claims by
Deposit Mobilization Banks (DMB) showed a sharp increase from GH¢487 million to
over GH¢1 billion in June 2015 and increased to GH¢5.2 billion as at January
2017, after which it reduced to about GH¢4.6 billion in May last year.
The defunct UT and Capital Banks got
significant amounts of the funds to help them in their daily operations because
they were seriously under-capitalised.
uniBank’s Diagnosis
In the case of uniBank, the BoG said
in a report on the state of the banking system that it had faced severe
insolvency and liquidity challenges over the past two years, with persistent
clearing deficits resulting in extensive reliance on the Bank of Ghana’s
Emergency Liquidity Assistance (ELA) instrument since 2015.
“As a result, BoG is heavily exposed
to uniBank to the tune of GH¢2.2 billion, of which GH¢1.6 billion is unsecured.
The bank also faces a significant capital shortfall. On March 20th, 2017, BoG
directed uniBank, per a letter, to submit a capital plan and resolve its
significant undercapitalization within 180 days from the date of the letter, in
accordance with Section 106(1) of the Banks and SDIs Act 2016 (Act 930).
“Since then, uniBank’s Capital
Adequacy Ratio (CAR) has rather deteriorated into the negatives from September
2017, and in a much more distressed condition with CAR of negative 24.02% and
capital deficit of GH¢1.18 billion as of December 2017. This notwithstanding,
the bank has continued to increase its asset base (granting new loans to
clients) to GH¢6.1 billion in December 2017 from GH¢4.9 billion in September —
amidst increasingly poor loan asset quality.
“The bank’s gross loans increased by
GH¢760.67 million within the same period. As a result, its Non-Performing Loans
(NPLs) have remained high, further eroding the capital base of the bank and
presenting liquidity challenges. The reserve ratio (a measure of liquidity) has
remained consistently below 1.0 percent since October 2017, compared to the
regulatory minimum of 10 percent, resulting in a constant liquidity shortfall
and continued reliance on the BOG’s Emergency Liquidity Assistance facility.”
Meanwhile, the BoG continues to
license more microfinance institutions and upgrade savings and loans to
conventional banksk.
Lets Get Gist: is also investigating circumstances under which a bullion
van loaded with cash for one of the collapsed banks disappeared with the
driver.
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