Ghana Amalgamated Trust and its controversial role in Ghana's financial sector (Part 1)

Introduction

The Ghana Amalgamated Trust (GAT) was created by the government to address the vulnerabilities within Ghana's financial sector, especially following the 2017-2018 banking crisis. As part of broader banking sector reforms initiated by the Bank of Ghana (BoG), GAT was designed to stabilize local banks that were struggling to meet new capital requirements set by the central bank.

While GAT was initially introduced as a mechanism to support and revitalize these institutions, growing concerns suggest that it may now be serving a different purpose: enabling the government to acquire majority shares in local banks. This shift has significant implications for the structure of Ghana’s banking sector and the future of indigenous ownership within the financial industry.

Establishment and Purpose of GAT

GAT was incorporated as a special-purpose vehicle (SPV) on December 17, 2018, to raise capital for local banks struggling to meet the revised minimum capital requirements set by the BoG. Following the banking crisis, the central bank raised the minimum capital requirement to GHS 400 million, a significant increase that many local banks found difficult to meet.

The primary goal of GAT was to raise funds, inject capital into selected banks, and guide them toward financial stability. In essence, GAT was meant to ensure that these banks, which were critical to Ghana’s financial infrastructure, could remain operational, continue lending, and contribute to economic growth without the risk of collapse. The idea was to support local banks in meeting their new capital obligations and ensure their transformation into stronger, more resilient institutions.

Governance Structure

GAT’s governance structure reflects its strong ties to the government. The National Trust Holding Company (NTHC) serves as the sole shareholder of GAT, holding all issued shares on behalf of the Government of Ghana under a nominee shareholder agreement. This structure places significant government influence over the operations of GAT.

The five-member GAT board is chaired by Mr. Albert Essien, a former CEO of Ecobank, with Mr. Eric Otoo as the Managing Director. The board’s governance is supported by KPMG, which plays an administrative role under an agreement signed in March 2018. KPMG’s involvement is critical to ensuring transparency and accountability in GAT’s operations, particularly given the significant public funds involved.

GAT’s Financial Structure and Capitalization

GAT’s financial structure reflects a mix of government investment and capital raised through shares. The initial government investment in GAT was relatively small, amounting to GHS 10,000 for 1,000,000 ordinary shares. However, the bulk of GAT’s capital came from an additional GHS 800,000,000 investment through non-cumulative redeemable preference shares, also issued by the government through NTHC.

These preference shares do not grant dividends, but they are structured to be redeemable under specific conditions, giving the government significant control over the financial future of GAT and the banks it supports. The government’s intention was to use a portion of this capital for equity investments in struggling banks, providing them with the necessary funds to meet their regulatory requirements and stabilize their operations.

Concerns Regarding GAT’s Activities and Impact

One of the major concerns surrounding GAT is the lack of transparency in its operations. Since its establishment in 2018, GAT has not provided regular or detailed status reports to Parliament, despite handling significant amounts of public money. There is little clarity on how funds have been allocated, the performance of GAT’s investments, or the financial health of the banks it was intended to support.

This lack of transparency has raised alarms, particularly among policymakers and financial experts, who are calling for greater oversight of GAT’s activities. Parliament has a critical role to play in ensuring that GAT operates in a manner consistent with its original mandate. There are increasing calls for Parliament to demand a comprehensive status report on GAT’s performance and the management of its GHS 800 million in capital.

Failure to Benefit Local Banks

Despite the significant capital injected into GAT, many local banks that were supposed to benefit from its support have not seen tangible improvements in their financial health. In fact, GAT’s involvement has negatively impacted the balance sheets of some banks, exacerbating their financial challenges rather than alleviating them.

Critics argue that GAT has failed to meet its primary objective of supporting local banks and guiding them toward recovery. Instead, the entity has become more of an investment vehicle for the government, with little concern for the actual needs of the beneficiary banks. GAT’s high-interest funding, combined with the management fees it imposes, has placed additional financial pressure on the banks, undermining their ability to recover and remain competitive in the market.

This approach has led to further distress among local banks, many of which are now struggling with liquidity issues and are unable to participate meaningfully in Ghana’s economic growth. The very institutions that were meant to be saved by GAT are now at risk of being further weakened.

Conclusion: The Shift from Lifeline to Liability

GAT was initially established as a vital tool for stabilizing local banks and supporting their transformation in the aftermath of the 2017-2018 banking crisis. However, in practice, it has become a liability to the very institutions it was meant to help. With high-interest funding, lack of transparency, and misaligned priorities, GAT now threatens the long-term viability of local banks, which are crucial to Ghana’s financial ecosystem.

Parliament must act swiftly to reassess the operations of GAT and hold its leadership accountable. Immediate steps should be taken to demand a full status report on the management and use of GAT’s capital. Furthermore, there must be a review of GAT’s operational model, particularly its high-interest funding mechanisms, which are driving local banks further into financial distress.

It is time to question whether GAT, as it currently stands, is still serving the purpose for which it was created. Rather than continuing to operate in its current form, GAT may need to be closed or restructured entirely. Without such changes, the government risks further destabilizing the banking sector and eroding public confidence in its ability to manage financial sector interventions.

As we move forward, it is critical that the government and policymakers reflect on the lessons learned from GAT’s operations. Future interventions in the banking sector must be transparent, well-governed, and focused on long-term stability, rather than short-term political or financial gain. Only by adopting a more responsible and accountable approach can Ghana ensure the health of its financial sector and protect the interests of local banks.