Unibank mishap: was BoG reckless in it decision?
He explained that, the six months administrative role assumed by KPMG at uniBank was to conduct a financial review, unlike an audit which is holistic and comprehensive.
However, portions of the report issued by KPMG to the BoG disclosed that they did not get access to all the information needed and the BoG should consider the outcome of the report with cautiousness.
“As stated in our engagement letter unless otherwise stated in our report, we have not sought to verify information contained herein or performed procedures necessary to enable us to express an audit opinion on any of the financial or nonfinancial information contained in this report,” KPMG said.
Based on these statements, Dr Oduro Osae indicated that “anybody who wants to rely on that conclusion would have to go and do a further test and validate the areas KPMG could not validate before relying on the conclusion” due to the disclaimer issued by KPMG.
“BoG should have verified the unverifiable and invalidated areas that KPMG could not do and add to the conclusion before they proceed because if I were the lawyer for the bank, (uniBank), I would have punched holes in the KPMG report because if you don’t have every information, you don’t draw conclusions since if you draw conclusions and advise and on the basis of that the BoG takes decision and liquidates me, I will protest,” he added.
Spokesperson for the shareholders of uniBank, Sammy Gyamfi, had earlier reported that government owes uniBank GHC868,973,599 as at May 31, 2018, per a letter issued by KPMG to BoG on June 22, 2018.
Based on the supposed amount government owes uniBank, Dr. Oduro Osae asked, “if indeed government owes uniBank and if that amount owed by the government is paid, would they have an improved capital adequacy ratio that would allow the bank to continue operating as a liquid bank? Have the shareholders in uniBank indicated clearly that they are ready to pump more money into the bank?” he quizzed further.
The governance expert has also reprimanded the supervisory and regulatory department of the BoG for sleeping on their job to allow the collapse to occur.
While three of the proposed options were on how to rehabilitate the bank, the remaining three were on how to entirely liquidate the bank, using cost-efficient and non-complex but viable methods.
Although the August 1 dissolution of uniBank through receivership, with newly established Consolidated Bank Ghana Limited, is not exactly similar to any one of the proposed methods, a careful study of the fine details of that transaction vis-à-vis the options proposed shows that it was a fusion of four of the options that the official liquidator suggested to the central bank.
Except the firm’s options one and two, which proposed a recapitalisation by existing shareholders or a third party investor, the remaining four proposals bordered on a liquidation and/or nationalisation of the bank and a subsequent transfer of selected assets and liabilities to another bank under a purchase and assumption agreement.
Moreover, the report noted that, as of May 2018, UniBank was bedevilled with a myriad of challenges, resulting from a combination of poor corporate governance practices, high cost-income ratio and a deteriorating loan book, which altogether weakened it.
It said the bank had a capital deficit of GH¢7.4 billion compared to a regulatory requirement of GH¢400 million as minimum capital; its liabilities had exceeded assets by 248 percent; and liquid assets represented just two per cent prior to the dissolution.
The report said with a cost-to-income ratio of 70 percent, UniBank’s operational expenses were higher than the industry average of 40 percent.
It added that, 70 percent of the bank’s gross loans and advances and other assets, translating into GH¢5.6 billion, were granted to related parties – companies and individuals associated with the bank.
Some of the related parties that benefited from loans and advances included LHS Ghana (GH¢199m), Cassel Energy (GH¢188m), uniPrecision Printing (GH¢188m) and EIB Network (GH¢43m).
As part of plans to repay the GHC3.7 billion loan advanced to them and the GHC5.6 billion owed by the related parties, the shareholders proposed the following:
– Injection of GH¢1 billion not later than mid-July 2018
– Injection of GH¢1 billion by end of September 2018
– Assignment of the holding company’s (HODA) assets amounting to GH¢4.1 billion to the Bank.
This means an amount of GHC6.1 billion in total, would have been injected into the bank had the plan been followed.
KPMG said in the report that: “The nature of the shareholders’ proposal in response to Official Administrator’s demand notice for payment of GH¢5.6 billion (excluding interests) owed by related parties” would have been in “cash, buildings and others”, even though it admitted that: “The deliverability, credibility and achievability of shareholders’ proposal has not been tested”.
Some Ghanaians have questioned, how would the Shareholders’ loan repayment proposal have impacted capital and liquidity?
But, according KPMG, UniBank would have had capital deficit of GHC2.9 billion in the best case scenario, adding that: “With the combined impact of all interim payment certificates being paid by government, the capital deficit of the bank” would have improved “t
o GH¢2.2 billion in the best case scenario”.
It said liquidity of the bank would have improved in the short-term with the cash injection of GHS2 billion by September 2018, albeit medium-term liquidity challenges would have remained.
The report also said as of 31 May 2018, the liabilities of the bank exceeded assets by 284%, with capital deficit being GHS7.1 billion based on Return on Risk Weighted Assets (RWAs) which was -514%.
It said there was “significant deterioration in asset quality” of uniBank.
The report noted that “deficiencies in internal governance and bank-wide arrangements undermined the viability” of uniBank.
It said uniBank’s earning capacity continued to “deteriorate due to low returns on RWAs and a significant operating cost burden”.
As of the period under review, uniBank’s “cost-income ratio was -113%”.
The bank’s liquid assets, as of the time, according to KPMG, represent 2% of total liabilities.
In a statement issued on Monday, August 20, 2018, the Shareholders state: “The recent appointment of KPMG as the Receiver in respect of some assets of uniBank and four other banks shows KPMG seeking to benefit from the report that it provided to the Bank of Ghana through a further paid engagement, a clear conflict of interest situation which does not put KPMG in a good light.”
In the first public statement from Unibank since the revocation of the licence, the shareholders of UniBank disparaged the BoG for failing to provide them a copy of a report purporting to be authored by the international audit firm, KPMG, on the Financial Condition and Future Prospects of UniBank Ghana although the same document has found its way to the media.
They Shareholders allege that although they requested for a copy of the report, the BoG denied flatly them a copy of the document.
The Shareholders say, “It is unacceptable for the Bank of Ghana and KPMG to deny Shareholders access to the report, even as material in the report is being widely disseminated to discredit UniBank and instigate public contempt and opprobrium against UniBank. No opportunity has been provided to the Shareholders of UniBank to respond to any purported findings of KPMG and yet they are being tried by the court of public opinion without the full facts of the case.”
The bank’s shareholder, Dr Kwabena Duffuor, is therefore in court to challenge the revocation of the bank’s licence.
Other reliefs sought by Dr Duffuor include a declaration that the “good assets and liabilities of uniBank, including deposits of depositors, cannot be lawfully vested in Consolidated Bank Ghana Limited.
He is also seeking a declaration that the licence purportedly granted to the Consolidated Bank Ghana Limited was not granted in accordance with Act 930 and therefore is “null and void.”
The plaintiff is also praying for an order of mandatory injunction requiring the BoG to restore uniBank to private management and shareholding and any other reliefs, which the court may deem fit or just.
Obviously, the Unibank saga is still far from over.