When news broke out that the Bank of Ghana (BoG) had revoked the licenses of UT Bank and Capital Bank, because they were “deeply insolvent”, meaning their liabilities overwhelmed their assets, shareholders, customers and members of the Ghanaian public were taken aback.
According to the BoG, which indicated in a statement that it made efforts to help UT Bank and Capital Bank recover via private alternatives, the two banks were “unable to develop an acceptable plan” to keep them in business.
The Central Bank said there were “repeated agreements between the Bank of Ghana and UT Bank and Capital Bank to implement an action plan to address these significant shortfalls.”
The agreements, notwithstanding, the owners and managers of UT Bank and Capital Bank were unable to increase the capital of the banks to address the insolvency, hence the collapse.
The Chronicle wishes to congratulate the BoG for taking such a bold initiative to address a crisis that has the potential to, not only rock the banking sector, but also bring the entire economy to its knees.
The paper’s interest is premised on the fact that not only did the BoG revoke the licenses of the two banks to indicate its preparedness to sanitise the system, but it has also said it will investigate and sanction officials whose activities led to the collapse of the two firms.
“The last phase of the BoG’s action would involve a thorough investigation of operations of UT Bank and Capital Bank, and appropriate action will be taken against shareholders, directors, and key management personnel who are found to be culpable,” the BoG Governor, Dr. Ernest Addison, revealed during a press conference.
Last week Wednesday, the Central Bank cautioned prospective investors in gold not to deal with Menzgold, a gold buying company in the country, because the firm has no authorisation from the BoG to take deposits and give returns.
The Central Bank went further to warn prospective buyers and investors who deal with the company, to desist from doing so, saying they do so at their own peril, thus distancing itself from the operations of the company, in relation to clients depositing their gold for returns.
Yesterday, a Deputy Finance Minister, Mr. Kwaku Kwarteng, announced that there were seven other banks in distressed states, and called on the Bank of Ghana to keep a close eye on those financial institutions.
“…in respect of the other banks that are distressed to varying extents, the BoG will monitor them closely and step in as soon as it appears to the BoG that the interest of depositors and other participants are threatened,” he said, adding, “We are urging them to be alert.”
From the ongoing, it is the estimation of The Chronicle that the action of the Central Bank has demonstrated its commitment and determination to sanitise the financial sector for the benefit of all Ghanaians.
For some time now, there have been talks of acquisitions and mergers within the banking sector, at least, since the BoG indicated that it would increase the capital requirement for operating a bank in the country.
The Central Bank was explicit, saying re-capitalisation “has become more necessary because of weak economic growth and weak credit management skills” which are affecting performances in the financial sector.
To operate a bank in the country currently, one needs GH¢60 million, a figure which has been criticised by industry players as too low-lying.
Even though the new capital requirement is expected in September, this year, after the Central Bank has completed its work on the distressed banks, figures ranging between GH¢250 million and GH¢500 million are being bandied around as the possible requirements to be announced.
That notwithstanding, Mr. Frank Adu Jnr, Managing Director of Cal Bank, is pushing for a cool GH?1 billion as the capital requirement to sanitise the Ghanaian banking industry.
It is the hope of The Chronicle, therefore, that this exercise would not be a nine-day wonder, but that the BoG will continue to sustain the status-quo to ensure complete sanity in the financial sector.
This will build the confidence of the Ghanaian population in the financial system, which is fast eroding, especially, with the introduction of money transfers by the various telecommunication companies.
We believe that if the Central Bank had been this proactive, the Pyrams, DKMs and the other financial scams that rocked the country would have been prevented.
When news broke out that the Bank of Ghana (BoG) had revoked the licenses of UT Bank and Capital Bank, because they were “deeply insolvent”, meaning their liabilities overwhelmed their assets, shareholders, customers and members of the Ghanaian public were taken aback. According to the BoG, which indicated in a statement that it made efforts […] Read Full Story
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