The banking sector has endured difficult times in recent times, resulting in confidence in the sector being at an all-time low.
Although the sector has been challenged for a number of years, the recent collapse and liquidity crush can be traced to four major factors, among others. These include;
1. Regulatory dominance and finger prints of Databank and Enterprise Group on the sector
In 2017 when founding members and staff of Databank were being appointed to directorship positions in financial sector regulatory agencies, I warned Ghanaians that the Finance Minister, Mr Ken Ofori Atta, was going to be the biggest threat to Ghana’s financial and banking sector stability and growth.
Since then, Ghana has experienced very unprecedented decline and collapse of the sector. This has resulted from self-seeking and politically motived regulatory environment. It is no secret that a Universal Bank is the only missing business in Mr Ofori-Attah’s collection of investments.
Only recently, his Enterprise Group hinted that they were on a look out for a prey. Enterprise Group to buy a bank? Why now?
Is that why our banks are being rundown by regulatory conduct so they can be picked up by Databank and Enterprise Group for peanuts? We must be worried.
2. Error-Prone regulation and hostility by Bank of Ghana a graveyard for local banks
The emergence of Dr Ernest Addison as the central bank Governor and the forcing out of the former Governor and the Second Deputy Governor marked the beginning of an error-prone and antagonistic regulatory regime that has eventually succeeded in bringing the local banks on their knees.
The Governor and the central bank have often engaged in conduct detrimental to the sector they are expected to regulate and promote. It is sometimes difficult not to conclude that these are deliberate.
It is important to understand that the work of a central bank Governor and a central bank is akin to that of a medical surgeon. Like the surgeon, high standards of precision and certainty are required. The margin of error is intolerably low because there are no second chances.
Whilst an error on the part of a surgeon could lead to death, that of a governor and a central bank in addition to deaths, could lead to job losses, destruction of careers, high fiscal costs that could impoverish lives as well as loss of assets and financial investments of millions of people.
It is therefore a disaster to have an error-prone Governor and Bank of Ghana. Below are a few examples in just a little over a year;
- The Central Bank under Dr Addison issues two final licences for Construction Bank and Beige Bank and goes ahead to personally launch them with pump and pageantry and turns around to collapse both of them in a year.
These beg the questions; how did you conclude that their provisional licences should be confirmed? What due diligence did you do to establish that they had met the conditions precedent to a final licence?
The collapse of the two banks means that after supervising the BoG to issue them licences, Dr Addison has come back in a year to say he got both of them wrong.
That is 100 per cent margin of error.
- In 2017, Dr Addison and BoG swooped on UT Bank and Capital Bank and handed them over to GCB Bank in a questionable purchase and assumption transaction.
At the time, he assured Ghanaians that it was the last time we were going to have to witness a bank collapse. He also assured that staffs of UT/Capital banks were going to be employed by the takeover bank, GCB Bank. What has happened?
Five additional Banks just collapsed under his watch. From two banks to seven banks in just a year?
What margin of error is this? Over 2000 former UT/Capital banks staff have lost their jobs as GCB Bank itself has been turned into a liquidity nightmare.
Again what margin of error is this? We are in the hands of a reckless surgeon who has an intolerable high margin of error waiting to kill all of us.
- Dr Addison and BoG have consistently put up a posture that has worked against the local banks being able to raise money to meet the new minimum capital. These have taken the form of either confidence dipping actions or deliberate lack of guidance on critical criteria for mergers, acquisitions and fit and proper persons expectations.
- In April 2018, Dr Addison indicated that he will publish the list of banks that were unlikely to meet the minimum capital in July. Six clear months to the deadline. At the time, I indicated that his conduct was akin to disconnecting a live support machine from a patient whose samples had been sent to a laboratory for analysis to enable the doctor find a solution to save his life. At the time, I asked him of BoG’s guidelines on mergers and acquisition to guide the market. Clearly, the BoG was in an indecent haste to see the back of our local banks.
- The BOG only issued its guidance on mergers and acquisitions as well as Fit and Proper Person guidelines last month, with only five months left to the deadline. So, is it possible for any meaningful due diligence, valuation of proposed merger banks, negotiation of mergers and acquisitions as well as structuring of such deals and meeting of shareholding obligations of same to be done in five months?
If any bank had concluded a deal with an investor to bring in money to meet the minimum capital before BoG’s issuance of its fit and proper person guidelines and those investors are now not compliant with these new guidelines, can they conceivably find a new investor in five months to comply?
Clearly, BoG has set the conditions for the local banks to fail to meet the deadline so they can be collapsed.
- In July, the BoG decided to settle a shareholding and board disagreements regarding ADB Bank. Whilst not going into the merits, it has been known for a long time that shareholders of ADB Bank had disagreements.
As a result, investors interested in Ghana’s local banks have been watching this development. Then a day to the annual general meeting of ADB Bank of shareholders, BoG says it has annulled shares of other shareholders? Which investor will bring his money to invest in local banks with such arbitrariness?
- It is obvious that the conduct of BoG has scared away investors from the banking sector with only four delicate months left. Ghana has had many smooth recapitalisation regimes in the past but the level of hostility, antagonism and regulatory gymnastics being experienced with this recapitalisation are shocking and alien
3. Databank’s Ogbamey Tetteh and SEC Inciting run in on local banks
In May 2018, the Securities and Exchange Commission (SEC) and its CEO, Rev. Ogbamey Tetteh, who resigned his job as a Vice President of Databank to be appointed as the Director-General of SEC, administered the last dose of poison to the Ghanaian banks and delivered their death certificates.
In a dangerous directive issued to asset or fund management companies, Rev Tetteh and his SEC incited the fund management companies to run in on banks. He directed the fund managers to wind down their investments in six months. That is to say, they should redeem all their investments in six months.
It is instructive to know that these fund managers mobilise a lot of deposits and invest them in financial and other instruments to earn spreads or profits.
As at the end of June 2018, these fund managers had mobilised and invested GH¢30.7 billion in Ghana’s financial sector.
The biggest investments held by fund managers are term deposits in local banks.
Thus, the directive to wind down these investments have resulted in fund managers issuing large claims or triggering redemptions of their investments in local banks and moving these funds to foreign banks as safe havens.
As a result, local banks that hold these funds have become insolvent in just two months. For example, Beige Bank held GH¢2 billion of fund managers deposit at the end of May.
As a result of the directive by SEC, Beige Bank saw a redemption or withdrawal of GH¢1.5 billion by fund managers in compliance with SEC’s directive.
Show me any Bank that is only seven months old that will lose GH¢1.5billion liquidity and still remain solvent. So, SEC creates insolvent local banks for BoG to move in and collapse them under the guise of insolvency.
I know of a local bank owned by hardworking Ghanaian entrepreneurs that holds GH¢4 billions of fund managers Investment.
If that bank meets the GH¢400m minimum capital but fund managers’ redeem their GH¢4 billion deposits with the bank, it will have a hole of GH¢3.6 billion and will, straightaway be highly insolvent and prey for BoG.
Show me an investor who concludes due diligence and valuation of a target bank to invest in and in one month, sees that the bank has lost GH¢1.5 billion deposits resulting not from market conditions but regulatory stance and will not flee with the money?
That is the fate of local banks now. Their deals to meet the minimum capital are crumbling due to the incitement of SEC, which is resulting in a run on. This has weakened their business case and valuations.
For me, the SEC, now headed by a former Databank vice president is now an undertaker and a graveyard for our local banks and financial institutions.
As I write, Ghana’s financial sector is on the verge of a shutdown as a result of this singular vindictive SEC directive.
You cannot wind down investments of GH¢30.7 billion that have financed Ghanaian businesses with maturities running into years and expect to have liquidity in the institutions that participated in the intermediation process.
I am reliably informed that cheques of fund managers are bouncing as liquidity has dried up in the system. Fund managers are triggering investment redemptions in financial institutions and some local banks without favourable responses. This is why the financial system will shut down if this is not reversed.
Ghana Consolidated bank, a fiscal fraud on taxpayers?
The so called Ghana Consolidated Bank is a Ponzi special purpose vehicle for fiscal fraud on the people of Ghana.
It is a scheme for you and I to clean up any mess and pay for any toxic assets in these five banks and leave a properly trimmed, repaired, capitalised and fully solvent bank to be sold to cronies under the guise of listing on the Ghana Stock Exchange.
Who will appoint the transaction advisor for an eventual IPO? Who will determine the allotment of shares? Don’t be surprised to see this go to Databank and Enterprise Group or companies with beneficial interest.
Already, the influence and interests of the Finance Minister and Databank are all over the so called Ghana Consolidated Bank.
A careful look at the team that took over the five banks will tell you it is a fiscal fraud on Ghanaians to create a bank for Databank and Mr Ofori-Atta.
Who is Babatunde Ampah who is on the Ghana Consolidated Bank team?
He is the current Vice President of Databank in charge of Corporate Finance.
What is he doing there? Are Databank staff now part of BoG?
Did Mr Ampah front for Mr Ofori-Atta to buy two of the merged banks and when it failed BoG moved in with Mr Ampah leading the team to take over one of the banks he fronted for the minister’s company to buy?
How can a finance minister who refuses to pay GH¢5.7 billion owed contractors and service providers that would have saved the local banks rather find almost GH¢8 billion to pay for the collapse of same banks?
How much are we spending on Free SHS? Just a paltry GH¢1.2 billion for 2018 and yet we are on the verge of spending GH¢10 billion of taxpayers’ money to clean up and prepare a prey for someone to take.
Until Mr Ofori-Atta is removed, Dr Addison resigns and we clean up the dominance of Databank in the regulatory space, Ghana’s banking and financial sector will be a pail shadow of itself and no recapitalisation will save it.