The Bank of Ghana has clarified that it has made available cash from the bond issued in the name of the Consolidated bank.
According to the Governor of the central bank, Dr. Ernest Addison, the move has helped in positioning the bank to undertake its business as usual.
His comments come on the back of concerns by some analysts following the addition of Heritage and Premium banks to the Consolidated bank due to the revocation of their licenses.
“The Bank of Ghana actually has monetized that bond what that means is that we have literally bought the bond of Consolidated bank and we have given them cash. So the initial liquidity problems that they had are not there; Consolidated bank has a lot of resources. They got three billion cedis from Bank of Ghana and they have that liquidity to do business with,” the central bank Governor stated.
The managers of Consolidated bank had faced initial liquidity challenges due to the seeming delay in the release of the cash from the bond issued in its name.
At the time of formation of the bank, the government issued a bond to the tune of about six billion cedis (GH¢6,000,000,000).
For Heritage and Premium banks, the Government of Ghana has issued a bond in the face of GHC 1.403 billion.
The Country Senior Partner for Pricewaterhouse Coopers (PwC), Vish Ashiagbor has been appointed as the receiver for Heritage and Premium banks.
He is among others expected to coordinate with the managers of the Consolidated bank with the addition of the two banks to the consolidated bank.
But what formed the basis for the revocation of the licenses of Premium and Heritage banks?
1) The bank had continuously breached the Capital Adequacy Ratio (CAR) requirement since December 2017. All efforts to get the bank to correct its capital deficiency position proved futile. The situation further deteriorated resulting in the bank reporting a CAR of negative 125.26% with a capital deficit of GH¢1.15 billion as at end November 2018. The bank’s reported net-worth as at end-November 2018 was negative GH¢528.33 million, implying the bank is insolvent.
2) The bank’s liquidity and solvency challenges prompted the Bank of Ghana to undertake investigations into how the bank was capitalised. The investigation has revealed that the bank obtained its banking licence under false pretences through the use of suspicious and non-existent capital, which has resulted in a situation where its reported capital is inaccessible to them for their operations.
3) The bank is exposed to its related parties to the tune of GH¢444.38 million as at July 2018 totalling [37.2% of the bank’s loan book as of November 2018]. The said amount was more than the bank’s net own funds thereby breaching the regulatory limit of 10%. The bank has not been able to recover these funds. Outstanding loans to related parties were wrongly classified by the bank as “investments” for reasons which remain unclear.
The promoters of Heritage provided evidence to Bank of Ghana at the time of the application for a banking licence to the effect that an amount totaling GHC 120.6 million was lodged with a local bank.
The amount of GHC 120 million was transferred to the bank from Agricult (a company wholly owned by Seidu Agongo, a promoter of Heritage) 10 which funds appear to have been derived from contracts awarded to Mr. Agongo by COCOBOD and are currently the basis of criminal prosecution in the High Court of Ghana. Meanwhile, it has come to the notice of the Bank of Ghana that the bank has yet to respond to two High Court orders for disclosures relating to these and other contracts affecting the significant shareholder Mr. Agongo.
While Mr. Agongo claimed that his sources of capital for the bank included proceeds of a USD 19.25m contract with COCOBOD, Bank of Ghana’s subsequent investigations have shown that there was no such contract between COCOBOD and Mr. Adongo. One or more contracts executed however existed between COCOBOD and Sarago Limited (“Sarago”).
Documents submitted to the Bank of Ghana for licensing of the bank made no mention of the contract between COCOBOD and Sarago nor the fact that Sarago (also a shareholder of the bank) was owned by Mr. Agongo.
From its 2017 audited financial statements, an amount of GHc15.8m was transferred to the bank from an unnamed investor which was attributed to unpaid called-up share capital, calling into question whether the minimum capital of the bank had been fully paid up at the time of licensing.
From the same financial statements, an operating loss was booked resulting in a shortfall of GHC 20.6 m in the bank’s capitalisation.
This was expected to be repaid by an unnamed shareholder through a transfer of fixed assets (branches) to the bank. Despite attempts by the Bank of Ghana to confirm (i) the identity of the unnamed shareholder, (ii) the basis of valuation of the fixed assets, and (ii) whether the terms of the transactions were at arms’ length, and otherwise acceptable, the bank and its shareholders, directors, and management have failed to clarify matters.