Business News of Mon, 6 Aug 20182

GHS5.7bn bond will not affect IMF assessment – BoG

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The Bank of Ghana governor, Dr. Ernest Addison, has insisted that the IMF’s assessment of the country’s fiscal performance will not be damaged on account of issuing the latest GH?5.7bn bond to finance the gap between liabilities and good assets assumed by Consolidated Bank.

“In our discussions with the IMF, because of the importance that the Fund attaches to the financial sector issues, debts that government issues to solve financial sector problems are not part of what is used to assess fiscal performance.

“So, the financial sector is very critical – and therefore we have been able to agree with them that this is not going to be part of the fiscal assessment for 2018,” Dr. Addison explained during a press conference to announce the merger of five banks into what is now the Consolidated Bank.

Ghana has a three-year arrangement with the IMF that was approved on April 3, 2015, for a release of US$955.2million. It aims to restore debt sustainability and macroeconomic stability in the country to foster a return to high growth and job creation, while protecting social spending.

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On April 30, 2018, the Executive Board of the International Monetary Fund (IMF) completed the fifth and sixth reviews of Ghana’s economic performance under the programme supported by an Extended Credit Facility (ECF) arrangement.

Completion of the reviews enables the disbursement of SDR 132.84 million (about US$191million), bringing total disbursements under the arrangement to SDR 531.36 million (about US$764.1million).

During the review, adjustments were made in the programme to ensure it remains on track and to enhance its prospects for success. In this context, the Executive Board also granted waivers, including for deviations in a few programme targets.

The Bank of Ghana (BoG), on Wednesday, announced that it had granted a universal banking licence to Consolidated Bank Ghana Limited and an initial GH?450m capital injection to take over the assets of five banks: including The Royal Bank Limited, Beige Bank Limited, Sovereign Bank Limited, Unibank and Construction Bank Limited.

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Under the agreement, Consolidated Bank has acquired all deposits and other specified liabilities and good assets of the five banks.

Background

UniBank and Royal Bank were identified during the AQR update in 2016 exercise to be significantly under-capitalised. The two banks subsequently submitted capital restoration plans to the Bank of Ghana. These plans, however, yielded no success in returning the banks to solvency and compliance with prudential requirements.

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The Official Administrator appointed for uniBank in March 2018 has found that the bank is beyond rehabilitation. Shareholders, related and connected parties had taken amounts totalling GH¢3.7billion which were neither granted through the normal credit delivery process nor reported as part of the bank’s loan portfolio.



In addition, amounts totalling GH¢1.6billion had been granted to shareholders, related and connected parties in the form of loans and advances without due process and in breach of relevant provisions of Act 930. Altogether, shareholders, related and connected parties of uniBank had taken out an amount of GH¢5.3billion from the bank – constituting 75 per cent of its total assets.

In the case of Royal Bank, an on-site examination conducted by the Bank of Ghana on 31st March 2018 revealed a number of irregularities. Its non-performing loans constituted 78.9 per cent of total loans granted, owing to poor credit risk and liquidity risk management controls.

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A number of the bank’s transactions totalling GH¢161.92million were entered into with shareholders, related and connected parties – structured to circumvent single obligor limits, conceal related party exposure limits, and overstate the capital position of the bank for the purpose of complying with the capital adequacy requirement.

In the case of Sovereign Bank Limited, as part of Bank of Ghana’s investigations into the failure of Capital Bank Limited (currently in receivership), it emerged that Sovereign Bank’s licence was obtained by false pretences through the use of suspicious and non-existent capital. The bank is insolvent and unable to meet daily liquidity obligations falling due. Liquidity support granted so far to the bank amounts to GH¢21million as of 31st July 2018. The bank has not been able to publish its audited accounts for December 2017, in violation of section 90 (2) of Act 930.

Beige Bank and Construction Bank were each granted provisional licences in 2016 and launched in 2017. Subsequent investigations conducted by the Bank of Ghana revealed that – similarly to the case of Sovereign Bank, both banks obtained their banking licences under false pretences through the use of suspicious and non-existent capital, which has resulted in a situation where their reported capital is inaccessible to them for their operations.

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