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August 4, 2018 | Opinion/Feature

Consolidated Bank Ghana Ltd: The Baby With Complications

Ellis Kofi Akwaa-Sekyi
Consolidated Bank Ghana Ltd: The Baby With Complications

For those who have been following developments in the Ghana banking industry, the press release from the Bank of Ghana issued on 1st August 2018 did not come as a surprise. I took my time to read the 12-page document (press release) and the content is pregnant with issues. It is astounding to find some of the allegations levelled against the banks in question.

What beats my imagination is the fact that people have taken positions to serve this dignified industry with integrity yet such serious violations could take place. I am not sure the culprits operated in any high-level sophistication to the blind side of supervisors.

I see a lack of willingness to do the right thing. The list of allegations levelled against the banks has been broadly categorized under operational, compliance, reporting and corporate governance in the table. I used the Basel I & III framework for internal controls as a guide in this categorization.

ISSUES IDENTIFIED BY BoG

WHO MUST BE HELD RESPONSIBLE?

OPERATIONAL

Insolvency, Non-Performing Loans (72.8%-89%), non-interest and non-collateralized loans,

Management

Board of Directors

Internal Audit Unit

External Auditors

COMPLIANCE

Capital deficits, unlawful transactions to shareholders, connected and related parties, irregularities and violations, persistent breach of banking laws, regulatory requirements and prudential limits, use of loans to fund initial paid up capital

Internal Audit Unit

External Auditors

Bank of Ghana

Promoters

REPORTING

Undisclosed deposits and loans, over-statement of loans and advances, over-statement of capitalized fixed assets, inability to publish audited accounts,

Board of Directors

Internal Audit Unit

External Auditors

Bank of Ghana

CORPORATE GOVERNANCE

Weak corporate governance and internal control environment

Board of Directors

Internal Audit Unit

Bank of Ghana

The table above is a classification of the reasons for revoking the licenses of the affected banks given by the Governor of the Bank of Ghana in the press release. The second column under the heading ‘who must be held responsible?’ is my own addition. I tried to conjecture that, the people or group of people listed couldprovide answers to why these events occurred under their watch in an industry where integrity, discipline, compliance and professionalism are serious requirements.

The circumstances surrounding the collapse of the five banks namely uniBank, Royal Bank, Beige Bank, Sovereign Bank andConstruction Bank pose serious concern to theoffspring bank, Consolidated Bank Ghana Ltd. It is likely that the appointees will uncover more challenging situations than they have envisaged bearing in mind all the dark sides or mergers and acquisitions. Usually, the establishment of a bank is born out of intent, motivation, willingness, grooming, preparation and readiness to face the unpredictable events of the industry. This is what I term ‘the pregnancy stage’ of a business. It is obvious that this new birth of a bank did not go through this process. It is very artificial and might lack lots of natural endowments needed in raising up the child. However, there are many such children born under very complicated situations but have survived and done well. I am looking up to the appointees given the mandate to steer the affairs of this bank to justify the confidence reposed in them. It is a different ball game if you apply for a job and if you are given a job you did not apply for.

Lessons
It is quite unfortunate this should happen to our local banks. The crusade for the patronization of local goods remains unabated. However, being local and indigenous should not analogous with perpetuation of indiscipline, lowering of standards and low quality. There are good indigenous banks doing very well because they are committed to the rules of the game. The banking industry is the most regulated of all industries because of their fiduciary role and the interconnectedness of their activities with all other sectors of the economy. I would not be surprised to see some financial institutions still peddling same trade that saw the demise of these five banks. I have high expectations for the banking industry as a key player in the fight against corruption. They can do this byraising their ethical echelons to the extent of making it illegal for staff to take tips from customers as appreciation for good service. Elsewhere, a simple ‘thank you’ is all that a customer requires to show appreciation for good service. Banks should insist on paying full amounts to clients including decimal figures (pesewas). These are breeding spots for corruption.

My expectations from Bank of Ghana
The bank of Ghana should remain resolute in its effort to sanitize the banking sector, raising the bars of discipline, high customer service, transparency and professionalism among bank staff. Timely, comprehensive and detailed information should be easily assessable on bank websites for all parties including researchers to peruse. Opacity in a transparent business is a recipe for disaster. The supervisory machinery of the regulator must be up and doing in order to restore the waning confidence of customers. The proliferation and mushrooming of financial institutions should see a revolution, guided by client protection. The Central Bank if necessary can outsource some supervisory activities or open up a complaint unit where people can volunteer information on some of the institutions that emerge in places obscure to the regulator. Can we conclude that the regional offices of the Bank of Ghana lack the capacity to exercise their authorities since most of the illegal financial institutions operate under their watch?

I would like to conclude with some questions directed at the regulator. What happens after the announcement of the collapse of these banks? What happens to the people or group of people whose actions or inactions contributed to these violations and illegalities? Is it going to end at just the collapse and that is all?The people of Ghana can only take the regulator serious if they make efforts to sanction those who deserve to be sanctioned. Restoring confidence in banking means enforcing strict rules, punishing culprits to serve as deterrent and creating enabling environment with support for participants in financial intermediation. Corporate governance practices, recruitment of bank staff, internal and external audits and board of directors should be more stringent than it has been. The expectations are high for those in whose hands this complicated baby (Consolidated Bank Ghana Ltd) has been entrusted. They must be bold with effective bank management decisions such as downsizing, strict adherence to rules, effective risk management and internal controls, compliance to prudential requirements, and high level of professionalism to support the industry and economy.

By Ellis Kofi Akwaa-Sekyi
[email protected]

Disclaimer: "The views/contents expressed in this article are the sole responsibility of Ellis Kofi Akwaa-Sekyi and do not neccessarily reflect those of Modern Ghana. Modern Ghana will not be responsible or liable for any inaccurate or incorrect statements contained in this article."

quot-img-1"A day is coming, tortoise will fly."

By: FRANCIS TAWIAH(Duisb quot-img-1
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