UT, Capital Bank Blew GH¢1.47bn BoG Bailout!

Details are emerging about how two of the seven defunct private banks spent huge amounts of money given to them by the Bank of Ghana (BoG) as bailout to save them from collapse.

Reports indicate UT Bank and Capital Bank were given a total of over GH¢1.47 billion of the taxpayer's money.

Investigations by the Central Bank revealed that the handlers of the two private entities engaged in 'willful deceit.'

Apart from UT and Capital Bank, which were taken over by the BoG and given to the GCB Bank per Section 123 of the Banks and Specialised Deposit-Taking Institutions (SDIs) Act, 2016 (Act 930) August last year, Beige Capital, Sovereign Bank, Construction Bank, UniBank and Royal Bank have recently been taken over and merged into Consolidated Bank Ghana Limited.

Critics are calling for the arrest of the directors of the banks, as well as the BoG officials, who supervised the plundering of the cash. The current management of the Central Bank is fixing the mess it inherited from the administrations of Henry Kofi Wampah and Abdul Nashiru Issahaku.

Tongues are wagging at the level of rot in the banking sector with public confidence at an all-time low.

Bailout Cash
UT is said to have been given over GH¢860 million by the BoG while Capital Bank got GH¢610 million, all in the form of liquidity support to enable them to improve the fortunes of the financial institutions but the directors blew all the money, putting customers' deposits and investments in danger.

It has emerged that as at 2015 financial year, Capital Bank had depleted its capital base to the point where it could no longer meet the request of depositors, and that compelled the Central Bank to provide the bailout.

First Class Tickets
Bizarrely, the BoG's investigative report revealed that when the Capital Bank Board of Directors met to decide how to use the bailout, they allegedly gave GH¢27 million to a member to promote the business and GH¢2.5 million was dished out for rebranding.

Capital Bank was established by William Ato Essien with Mensa Otabil as its Board Chairman.

Fees and benefits of the Board of Directors were reportedly increased at the same meeting, and two first and business class air tickets were given to each member at the same meeting from the BoG's money.

Fronting For Companies
Reports say GH¢130 million was given to another company that fronted for two other companies.

According to the report, the GH¢130 million came back to the BoG through the establishment of Sovereign Bank.

In effect, part of the money given to Capital Bank as bailout was rather diverted to start a new bank altogether.

Twelve months after Capital Bank received GH¢610 million from BoG, it collapsed, but interestingly, this was at a time when the threshold for operating a bank was GH¢120 million.

The stories about how the local banks collapsed have set tongues wagging, with the majority of the public calling for prosecutions and punitive sanctions against the errant bank owners and their board of directors.

Experts have said their actions breached the provision which prohibits placement of forex with a savings and loans company and also breached the provision which says Savings and Loans cannot give forex loans.

BoG Report
A BoG Examination and Inspection Report by Boulders and Advisors Limited in 2014, for instance, found that there was a significant amount of inter-group lending within UT and Capital Bank.

This was after a review of two forms of related party transactions; first was loans granted to individuals and companies related to the bank and loans granted to companies connected to one another by ownership and directorship but unrelated to the bank group.

“Capital Bank was a web of transactions involving insider parties, that is, directors, shareholders and their related companies,” the report said, adding “the initial transactions imply willful deceit at the conversion stage from a saving and loan to a full Tier 1 banking license. At this stage, the shareholders appear to re-engineer capital amounting to GH¢56 million through a suspect placement to local financial institutions.”

“On March 30, 2016, the CEO of the Capital Bank wrote to the Head of Banking Supervision requesting that a non-existent investment of GH¢482.4 million, which included the GH¢56 million, should be converted into a five-year debt.

“The BSD, in a letter dated June 3, 2016 referenced BSD/52/2016 to the Managing Director of Capital Bank that the BoG granted approval in principle for the non-existent investment of GH¢482.4 million to be structured in a loan facility to be paid by the following shareholders over a period not to exceed five years: Ato Essien, Oheneba Osei Akoto, Stephen Enchill and Kingsley Atta Ghansah. This action granted by the BoG could have been avoided in 2015 when the Risk Assessment report indicated that no capital had been introduced into the bank for the Class 1 Licence.”

UT Bank
In the case of UT Bank, the report said two payments were made to the former CEO and Director, Prince Kofi Amoabeng from a loan defaulting entity, Kofi Jobs Limited, adding that the loans totaling GH¢5 million were never disclosed to the Board of Directors of the bank.

Kofi Jobs Limited is allegedly linked to Ibrahim Mahama's Engineers and Planners. Some of the contracts won by Kofi Jobs under previous Mahama administration were executed with Engineers and Planners' equipment.

“There was a significant amount of inter-group lending, involving other subsidiaries of the holding company, UT Holdings (¢71.6 and $14.3 million),” it added.