BoG’s roadmap for clearing UT, Capital bank mess

• Posted on August 14, 2018
• by Ellsamwise King
• Comment

The Bank of Ghana announced the collapse of two local banks – UT and Capital banks – a year ago because they were “deeply insolvent.”

BoG, however, allowed the GCB bank to acquire the banks and issued a GHc2 billion bond to clear the debt left behind.

That was the first time the central bank was taking such decision against a financial institution in the history of Ghana’s banking regime.

Subsequently, a leaked investigative report commissioned by the central bank showed that officials of Capital bank squandered some GHc610 million liquidity support given by the central bank.

The report also noted that instead of using the money to resuscitate Capital bank, the management, with the approval of the Board Chair, diverted the money for other uses, leading to the eventual collapse of the financial institution in August 2017.

Meanwhile, another document sighted show that that Bank of Ghana after the collapse of two banks put in place a strategic document tagged “Eagle Project” with timelines to clean the mess created.

The implementation of the roadmap was to begin on January 26, 2018.

Below is the full roadmap:

1. January 26, 2018: Meeting with Boulders Advisors Limited, Joint Receivers and Banking Supervision Department of Bank of Ghana for briefing on [Boulders] report and implementation of findings
2. January 29 – February 2, 2018: Identify and agree on low hanging fruits asset recovery
3. January 29 – February 2, 2018: Invite MC Management Services, Pronto Services and Breitling Services regarding payment of commercial paper GHS130m, GHS20m and GHS35m
4. January 29 – February 2, 2018: Receivers and EOCO invite Board of Capital Bank to explain Utility of Liquidity support of GHS620m and conditional payment of GHS27.5m by Board
5. January 29 – February 8, 2018: Inventory related business assets of Board members and related parties (Companies, realty such as Labone property, Dansoman property, oceanic Bottling Company, vehicles)
6. Immediately: All shareholders and ex-directors of Capital bank financial market institution for a period of undertake a written commitment of prohibition from any 5 years
7. Immediately: Declaration of Assets by Shareholders and Directors of Capital Bank
8. Immediately: Receivers / BoG to request Board of Sovereign Bank to resign
9. Immediately: Receiver/BoG to request shareholders of Sovereign bank to transfer all shares to Receiver
10. Immediately: Old Board of Sovereign Bank to request to assist recovery of investments placed with Nordea Capital
11. Immediately: Receivers with BoG approval, to appoint interim for two years management to manage the bank on a consulting basis
12. Immediately: Asset Quality Review to be immediately undertaken on Sovereign Bank to ascertain quality of Bank assets

1. Immediately: All shareholders and ex-directors of Sovereign undertake a written commitment of prohibition from any financial market institution for a period of 5 years
2. Immediately: Declaration of assets by Shareholders and Directors of Sovereign bank
3. Immediately: Receivers / BoG to request Board of Sovereign Bank to resign
4. Immediately: Receiver/BoG to request shareholders of Sovereign ban to transfer all shares to Receiver
5. Immediately: Old Board of Sovereign Bank to request to assist recovery of investments placed with Nordea Capital
6. Immediately: Receivers with BoG approval, to appoint interim management to manage the bank on a consulting basis for two years
7. Immediately: Asset Quality Review to be immediately undertaken on Sovereign Bank to ascertain quality of Bank assets
8. Immediately: All shareholders and ex-directors of Sovereign undertake a written commitment of prohibition from any financial market institution for a period of 5 years
9. Immediately: Declaration of assets by Shareholders and Directors of Sovereign bank
10. Immediately: Receivers/BoG invite shareholders and board of directors of UT Bank to address settlement of related party placements and debts GHS71.6m and US$14.3m
11. Immediately: All shareholders and ex-directors of UT Bank undertake a written commitment of prohibition from any financial market institution for a period of 5 years
12. Immediately: Declaration of Assets by Shareholders and Directors of UT Bank
13. Immediately: Receiver with the assistance of Bank of Ghana, Financial Intelligence Centre, Central Securities Depository and Registrar Generals’ Department assemble registered and financial assets of all shareholders and board of directors of Capital Bank and UT Bank including related family members (spouses, children and parents)

1. Immediately: BoG should first set up an internal financial stability committee which reviews the BoG’s internal supervision and licensing reports. It is important that BoG audits these internal reports prior to any steps being taken in coordination with other regulators. This committee should comprise internal and external members and be similar in standing to MPC. Given that BSD has internal shortcomings, it is important to introduce this external supervision. The new committee will be a committee of BoG’s board
2. Immediately after BoG Financial Stability Committee is set up: BoG should establish an inter-regulatory committee comprising of Securities and Exchange Commission, National Insurance Commission, Financial Intelligence Centre, Ghana Stock Exchange, National Pensions Regulatory Authority and Central Securities Depository to review findings of Eagle project report and to agree a process for strengthening the regulatory framework for the financial services industry
3. Immediately: Inter-regulatory committee to establish a sanction register list published quarterly to be used in screening ownership, board directorship of sanctioned persons
4. Immediately: Outcome of regulatory breaches identified by findings of receivers and sanction list to be referred for criminal review and prosecution
5. Immediately: Investigate related and connected businesses to ascertain beneficial ownership by ex-shareholders and ex-directors of Capital bank and UT bank.
6. Immediately: BoG should extend the Asset Quality Review by KPMG to cover 2017
7. Immediately: BoG to review green and brownfield licensing procedures
8. Immediately: BoG to ensure cash escrow of capitalization
9. Immediately: Developments and implementation of an industry standard Governance Code of Conduct
10. Immediately: Annual certifications should be required of all Directors on Financial Risk Management

1. Immediately: Quarterly certification by Board of Directors and key management of adequate disclosure on related and connected party transactions
2. Immediately: A two (2) year cooling-off period should be established for former BoG employees as consultants and acceptance of board directorships in any institution regulated by BoG
3. Immediately: Institute a quarterly certification of BSD key management, licensing and examiners on their dealings with any regulated financial institution
4. Immediately: Our recommendation is that liquidity support should be issued as a collateralized credit facility to be drawn down on need basis rather than a pool of cash availed to a bank. Every drawdown should be approved for a specific utilization by a BoG appointed advisor. This adviser should also serve on the board of the recipient bank and any drawdown must be accompanied by a note from the recipient’s auditors confirming that the recipient is a going concern as well as a memorandum which is circulated to members of the financial stability committee.

Source: CNR