Bank of Ghana Takes Regulatory Actions in Ghanaian Banking Sector

On August 15, the Bank of Ghana, Ghana’s central bank (Bank), announced that it was taking additional regulatory actions to address the failure of seven Ghanaian banks whose licenses had been revoked during the past year.  The Bank stated that

persons whose actions contributed to the collapse of the 7 banks will not be shielded, but will be made to face the full rigour of the relevant laws of Ghana. The Bank of Ghana will pursue administrative and civil action against such persons, and will liaise with relevant investigative and prosecutorial agencies of the State to take appropriate action as needed.

The Bank’s Deputy Governor, Elsie Awadzi, added that “[w]e are working very hard on submitting a dossier on each of these banks to the law enforcement agencies . . . to further investigate criminal behaviour or what could potentially be criminal behaviour and to prosecute.”

Since August 2017, when it revoked the licenses of UT Bank Ltd. and Capital Bank Ltd. due to severe deficiencies in capital and liquidity, the Bank initiated additional investigations into five additional banks: Unibank, Royal Bank, Beige Bank, Sovereign Bank, and Construction Bank.  On August 1, 2018, the Bank appointed a receiver to manage the assets of all five banks and revoked their licenses because they had become insolvent.

In announcing the revocations of the latter five banks, the Bank reported severe improprieties regarding each of the banks:

• Unibank: “Shareholders, related and connected parties had taken amounts totaling GH¢3.7 billion [US$782,550,000] which were neither granted through the normal credit delivery process nor reported as part of the bank’s loan portfolio. In addition, amounts totaling GH¢1.6 billion [US$338,400,000] 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 [the Banks and Specialised Deposit-Taking Institutions Act, 2016]. Altogether, shareholders, related and connected parties of uniBank had taken out an amount of GH¢5.3 billion [US$1.12 billion] from the bank, constituting 75 percent of total assets of the bank.”
• Royal Bank: “A number of the bank’s transactions totaling GH¢161.92 million [US$34,246,080] 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.”
• Sovereign Bank: “. . . Sovereign Bank’s licence was obtained by false pretences through the use of suspicious and nonexistent capital.”
• Beige Bank and Construction Bank: “[B]oth banks obtained their banking licences under false pretences through the use of suspicious and non-existent capital.”

In its August 15 release, the Bank also stated that its regulatory actions include an overhaul of the Bank’s supervisory framework and processes.  As part of that overhaul, the Bank established a new office called the Office of Ethics and Internal Investigations.  Significantly, it noted that the new Office was to “investigate all allegations of misconduct by staff including any role in respect of the collapse of the defunct banks.”  Finally, it stated that it issued a number of directives to strengthen corporate governance, risk management, and the capital base of banks.