Editorial: After the take-over, what next?

We are compelled to re-visit the two fallen banks- Capital Bank and UT Bank in view of unfolding issues surrounding the forceful assumption and control of the two private banks by the Bank of Ghana (BoG).

The BoG handed the two banks to GCB Bank following their precarious standing in the comity of banks.

A careful analysis of the emerging issues shows that the central bank cannot wholly escape blame if what has befallen Capital Bank and UT Bank are anything to go by.

The BoG was complicit as it folded its arms while the two banks sank.

The Central bank had been in the known about the level of rot by the two collapsed banks but appears to have glossed over them leading to their eventual collapse.

In its statement announcing the take-over, BoG, the umpire in the industry clearly admits that the affected banks’ inability to recapitalize has been a long running issue and goes ahead to even reveal that there were several meetings held in the past to create room and explore ways to allow the recapitalization to happen.

They said specifically that in spite of repeated agreements between them and the two collapsed banks to implement an action plan to address significant shortfalls, the owners and managers of both banks were unable to increase the capital of the banks to address the insolvency.

These actions the BoG has taken are in line with the provisions of section 123 of the Banks and Specialised Deposit Taking Institutions (SDIs) Act, 2016 (Act 930). Interestingly, Bank of Ghana – 2002 (ACT 612). Section – 60 which dwells on remedial measures designed to prevent situations escalating to the section 123 threshold, as experts put it, appear not to have been done. It activated Section 123 and clearly did not consider the alternative of regulatory capital injection as a lender of last resort either.

Capital Bank documents flying around showed that a former Governor of BoG was even notified about the company’s precarious situation when an internal report of a probe into how Third Party Funds (TPF) were used by the key shareholders was released.

We are getting information that Capital Bank and UT Bank might not be the only banks that put customer’s deposits in danger and that there are a couple of others who are going through insolvency problems and the earlier the BoG drop the axe the better.

Must regulatory institutions like the BoG always sit unconcerned and allow the banks and other financial institutions to put customers’ deposits and investments at risk before they intervene?

It is in our laws that once the signs are clear that a bank might be facing crisis, the BoG is mandated to activate Section 60 to avert any financial calamity but the regulator, in spite of initial interventions, appears to have allowed the problem to go full-blown before resorting to Section 123 to forcefully assume control of the bank and sell it to GCB instead of winding it up in liquidation proceedings.

The reluctance displayed sometimes by most of the regulatory institutions, be it financial, must be a source of concern for anyone who wants to see Ghana become prosperous for the benefit of its citizens.