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More stakeholders blame BoG for banking sector crisis

Image result for Beige Bank, Construction Bank, Royal Bank, uniBank and Sovereign bank into what it calls the Consolidated Bank Ghana
Adnan Adams Mohammed

Several banking sector stakeholders have consistently, since the genesis of  the ongoing crisis in the banking sector, heaped blame on the Bank of Ghana (BoG) as  the cause of the situation.
The most recent to add his voice in this regard is an Economist and lecturer at University of Ghana, Prof. Godfred Bokpin.
He has said that, the BoG is to blame for the woes of banks in the country.

Ghana is currently experiencing a period of banks’ struggles with many analysts calling for pragmatic measures to address the issue.

Prof. Bokpin speaking on the happenings indicated that, the BoG must take full responsibility for the crisis in the banking industry.

Also, Nana Osei Bonsu, President of the Private Enterprise Federation (PEF) has stressed that, the Bank of Ghana (BoG) played a role in the current crisis in Ghana’s banking sector with their negligence.

Speaking on the ensuing debate, Mr. Osei Bonsu said, the central bank is to blame for the current banking struggles.

“What is their [BoG] responsibility besides licensing these institutions? They are supposed to do due diligence. Do they have bank examiners [who] go into these banks to review the banks’ operations and portfolio?” he quizzed.

He was commenting on the consolidation of five local banks by the Bank of Ghana.

Nana Bonsu said the struggles of the banks could have been averted if the regulator was diligent with its supervision.

“If we had adequate [and] competent people within the Bank of Ghana who could do the analysis of banks’ potential licensing requirements and also review periodically their operations, this thing could not have occurred”, he intimated.

However, corporate governance expert, Marian Barnoh, has said the board members of the five banks that have been consolidated failed to deliver on their mandate.

Mrs Barnoh, a former Chairperson of Merchant Bank, said the failure of the boards to ensure that proper checks were doje resulted in operational challenges and breach of regulations that forced the Bank of Ghana to act to safeguard depositors’ money.

“The board’s duty is to ensure that there are checks and balances; the board’s duty is to ensure that there are risk management frameworks in place; the board’s duty is to ensure that credit management is in place; the board’s duty is to ensure that sanctions are in place,” she said last week.

Her comments were in reaction to the central bank’s revelations that it was forced to take the drastic step  to merge  five banks into one due to challenges such as non-performing loans and capital deficits that exceeded by many folds the regulatory minimum capital requirement.

“If loans have gone bad, the question is what happened to risk management? …What happened to accountability? Because that is the role of the board: to make sure that they receive the necessary report especially through the audit committee and the risk management committee,” she stressed.

Meanwhile, Godwin Adagewine, a law lecturer at the University of Professional Studies  in Accra, has said, the only way confidence can be restored in the country’s financial sector is for the Bank of Ghana to act with fairness and firmness in applying the law to all those found complicit— including its own staff— in the collapse of seven indigenous banks,
When the central bank collapsed and merged five local banks last week, it cited obtaining banking licences under false pretence as among the reasons for revoking the licenses of three of the banks—Beige, Construction and Sovereign.

Mr. Adagewine said, there are suspicions that some officials of the Bank of Ghana were compromised in the processes leading up to issuing licences to the banks; hence, a proper investigation must be undertaken to bring out the truth and punish officials found culpable to serve as a deterrent to others.

“There are certain things that the Bank of Ghana can do with regard to investigations and supervision. Some people are suggesting that, somehow, some officials of Bank of Ghana were compromised into accepting wrong documentation rather than rejecting them. What the Bank of Ghana can do is to seriously punish those officials if such is indeed the case.

“It is really impossible to ensure that these things do not happen unless we punish those who went wrong. So, my view is that directors and managers who are found guilty should be punished severely so as to deter others in the system from repeating similar actions,” he said.

He added that it is only after carrying out this action properly that lost confidence in the banking industry can be restored.

“The Bank of Ghana must act in the way that the law requires it to act, and this will bring confidence back into the system. In fact, that is the only way confidence in the financial sector can be restored; otherwise, it is near-impossible to restore the lost confidence,” he said.

Lawyer Adagewine is not the only one calling for heads to roll at the central bank and at the collapsed banks, as the incident has come at some GHc8 billion cost to the economy.

The Trades Union Congress has also in a press release signed by the Secretary-General, Dr. Yaw Baah, called on the central bank not to treat with kid-gloves any official found complicit in the banks’ collapse.

“To prevent repeat of the irregularities, including regulatory and supervisory failures that have led to the current situation, it is important that the activities which have led to the current banks collapse  and have necessitated what is perhaps the biggest bank bailout in Ghana’s history must be properly investigated and those culpable punished in accordance with the laws of the land,” the statement said.

On August 1, 2018, the BoG consolidated five local banks; Beige Bank, Construction Bank, Royal Bank, uniBank and Sovereign bank into what it calls the Consolidated Bank Ghana Limited. According to the Governor of the Bank of Ghana, Dr. Ernest Addison, some of the banks obtained their licenses through false means by presenting documents that painted a picture as though they could meet the new capital requirement.

In 2017 also, the central bank revoked the licenses of UT and Capital Banks because the liabilities of the two banks overwhelmed their assets.

The central bank has announced that a GH¢5.7billion bond will be issued to finance the gap between liabilities and assets of the five consolidated banks— after already doling out a GH¢2.2billion bond to settle the liabilities of UT and Capital Banks: the first two banks to go down
But, Prof. Bokpin said he was not surprised at the current turn of events because the central bank had failed in its due care regarding regulations.

“We are not completely taken aback. They (BoG) have given us the cause to blame them justifiably so. There is enough admission in their statement about the lapses that were orc
hestrated from the central bank of the point of view and therefore they cannot say or portray that they are innocent in this matter”.

Prof. Bopkin who is also the Head of the Finance Department at the University of Ghana Business School revealed that given the magnitude of the transactions and the interrelated parties involved in the deals, it would have been strange for the central bank to say it knew nothing about it.

“So the honorable thing to do which I think they have done is to admit that they were complicit somewhere along the line. The Central bank is to be blamed also”, he intimated.

It has emerged that the Bank of Ghana failed to enforce its regulations in granting licenses and supervising the operations of two local banks, UT and Capital Bank.

The report  indicated that the Bank of Ghana was complicit in the wrongful issuance of banking license to Capital Bank.

“A review of the issuance of a banking license to Capital Bank reveals complacency or complicity on the part of the BoG. During the application stage, the Capital Bank shareholders produced evidence of only GH¢23.2 million liquid investments and GH¢ 51.5 million illiquid investments.

The report indicated that the said funds that shareholders claimed were theirs were never transferred to the bank and although the attention of the Bank of Ghana was drawn to the situation, the BoG failed to sanction Capital Bank.

“The new funds were never transferred to the Capital Bank. In fact, the Capital Bank management began to refer to it as ‘re-engineered capital.’ This was brought to the attention of BoG, but again, there is no evidence of sanctions to either the institutions concerned or the individuals in senior management and on the Board of Directors.”

According sources of information, there may be an instance of fraud in the suspected misuse of liquidity support given Capital Bank by the Bank of Ghana (BoG).

The report noted that the then-Capital Bank CEO, Rev. Fitzgerald Odonkor may have had his signature forged in the authorization of specific deals related to the GHc 610 million liquidity support to the doomed bank.

The management of the Bank, with the approval of the Board Chair, diverted some of the BoG support or other uses.

Some of that money was presented as capital to set up another collapsed bank, Sovereign Bank.

Additionally, Member of Parliament for Buisla South, Dr. Clement Abas Apaak, has said the Bank of Ghana has failed Ghanaians.

The MP who is a member of the National Democratic Congress (NDC) specifically blamed the monitoring team of the Central Bank for not doing enough, and alleged it has not served the good people of Ghana well.

According to him, the Central Bank is supposed to work in the interest of Ghanaians but wonders how it had allowed itself to be compromised by some banks which reportedly acquired their licences by false pretenses.

“How is it possible that we have a central bank which is mandated to grant licenses, to monitor and of course evaluate and see to the activities of the banks under its authority do the right thing, and we have reports indicating that there is possible involvement and perhaps even connivance of persons who should have been overseeing these banks in ensuring that they acquitted themselves as per the laid down procedures”, he said.

The Buisla South MP believes if the Central Bank had done due diligence the banks would not have been able to get the license in the first place.

“If they were up and doing most of this things, these schemes certainly would have been detected and acted upon except of course there was conniving from within which then may have served as a shield to protect and allow some of these schemes to proceed,” he noted.

He added it is a worrying situation the actions of the Bank of Ghana has brought some banks on their knees.

“What is worrisome is that ultimately the burden of the lack of professionalism, connivance and blatant fraudulent  activities have resulted in some of these banks collapsing.”

He also added his voice to the numerous calls for investigations into the matter and a possible prosecution of culprits

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