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17.08.2018 Business & Finance

BoG Goes After Businesses Of UT, Capital Bank Ringleaders?

By CitiNewsRoom
BoG Goes After Businesses Of UT, Capital Bank Ringleaders?
17.08.2018 LISTEN

Bank of Ghana ought to have by now investigated businesses owned by persons behind the collapse of UT and Capital banks.

The central bank, in a document containing a road-map for cleaning the mess created by the defunct banks code-named “Eagle Project” and sighted by citinewsroom.com, was expected to have done the above as far back as January 2018.

According to the Eagle Project, Bank of Ghana ought to have investigated “related and connected businesses to ascertain beneficial ownership by ex-shareholders and ex-directors of Capital bank and UT bank.”

This was to possibly help the central bank ascertain whether such businesses had anything to do with the collapse of the two banks as well as how to possibly use their assets to defray any debt left behind by the defunct financial institutions.

The central bank per the road-map was also to have from January 29 to February 2, 2018, identified “and agree on low hanging fruits asset recovery” to help defray debts.

Background
UT and Capital banks collapsed about a year ago because according to the central bank, both financial institutions had become “deeply insolvent” and allowed GCB bank to acquire the banks.

The central bank also issued a GHc2 billion bond to clear the debt left behind.

Subsequently, a leaked investigative report supposedly commissioned by the central bank showed that officials of Capital bank and UT squandered a total of GHc1.4 billion liquidity support given them by the central bank.

The report also noted that instead of using the money to resuscitate the banks, their management, diverted the money for other uses, leading to the eventual collapse of the financial institutions in August 2017.

With regards to Capital Bank, the report claimed it used part of the liquidity support to set up another bank called Sovereign bank [which has also collapsed].

Assets of spouses, children of UT, Capital Bank gurus to be tracked

The Eagle Project which has specific timelines is expected to help the central bank determine causes of the collapse of UT and Capital banks, bring sector and security agencies including EOCO on board, finding innovative ways of clearing debt left behind and possible sanctions for persons indicted.

The roadmap recommended that the central bank together with Receivers of the two banks, PricewaterhouseCoopers should assess registered financial assets of spouses, children and parents of board of directors and shareholders of the said financial institutions, possibly to defray some of the debt with such assets if it indeed comes out that those assets were from booty of the collapsed banks.

“Receiver with the assistance of Bank of Ghana, Financial Intelligence Centre, Central Securities Depository and Registrar Generals' Department assemble registered and financial assets of all shareholders and board of directors of Capital Bank and UT Bank including related family members (spouses, children and parents).”

The Bank of Ghana per the “Eagle Project” was also to have taken stock of assets of all directors and shareholders of UT, Capital and Sovereign bank for a possible valuation and defraying of debt left behind by the collapsed banks.

The Joint Receivers of the defunct banks were also to have between January 29 and February 8, 2018, ought to have taken inventory of assets of related businesses assets of board members and related parties of UT, Capital and Sovereign banks.

Quarterly certification
By the Eagle Project, BoG is expected to take quarterly certification of Board of Directors and key management of financial institutions.

The board of directors and key managers of banks are also supposed to disclose transactions they go into with any “related and connected party.”

Check below for the Eagle Project timeline:

  1. January 26, 2018: Meeting with Boulders Advisors Limited, Joint Receivers and Banking Supervision Department of Bank of Ghana for briefing on [Boulders] report and implementation of findings
  2. January 29 – February 2, 2018: Identify and agree on low hanging fruits asset recovery
  3. January 29 – February 2, 2018: Invite MC Management Services, Pronto Services and Breitling Services regarding payment of commercial paper GHS130m, GHS20m and GHS35m
  4. January 29 – February 2, 2018: Receivers and EOCO invite Board of Capital Bank to explain Utility of Liquidity support of GHS620m and conditional payment of GHS27.5m by Board
  5. January 29 – February 8, 2018: Inventory related business assets of Board members and related parties (Companies, realty such as Labone property, Dansoman property, oceanic Bottling Company, vehicles)
  6. Immediately: All shareholders and ex-directors of Capital bank financial market institution for a period of undertake a written commitment of prohibition from any 5 years
  7. Immediately: Declaration of Assets by Shareholders and Directors of Capital Bank
  8. Immediately: Receivers / BoG to request Board of Sovereign Bank to resign
  9. Immediately: Receiver/BoG to request shareholders of Sovereign bank to transfer all shares to Receiver
  10. Immediately: Old Board of Sovereign Bank to request to assist recovery of investments placed with Nordea Capital
  11. Immediately: Receivers with BoG approval, to appoint interim for two years management to manage the bank on a consulting basis
  12. Immediately: Asset Quality Review to be immediately undertaken on Sovereign Bank to ascertain quality of Bank assets
  13. Immediately: All shareholders and ex-directors of Sovereign undertake a written commitment of prohibition from any financial market institution for a period of 5 years
  14. Immediately: Declaration of assets by Shareholders and Directors of Sovereign bank
  15. Immediately: Receivers / BoG to request Board of Sovereign Bank to resign
  16. Immediately: Receiver/BoG to request shareholders of Sovereign ban to transfer all shares to Receiver
  17. Immediately: Old Board of Sovereign Bank to request to assist recovery of investments placed with Nordea Capital
  18. Immediately: Receivers with BoG approval, to appoint interim management to manage the bank on a consulting basis for two years
  19. Immediately: Asset Quality Review to be immediately undertaken on Sovereign Bank to ascertain quality of Bank assets
  20. Immediately: All shareholders and ex-directors of Sovereign undertake a written commitment of prohibition from any financial market institution for a period of 5 years
  21. Immediately: Declaration of assets by Shareholders and Directors of Sovereign bank
  22. Immediately: Receivers/BoG invite shareholders and board of directors of UT Bank to address settlement of related party placements and debts GHS71.6m and US$14.3m
  23. Immediately: All shareholders and ex-directors of UT Bank undertake a written commitment of prohibition from any financial market institution for a period of 5 years
  24. Immediately: Declaration of Assets by Shareholders and Directors of UT Bank
  25. Immediately: Receiver with the assistance of Bank of Ghana, Financial Intelligence Centre, Central Securities Depository and Registrar Generals' Department assemble registered and financial assets of all shareholders and board of directors of Capital Bank and UT Bank including related family members (spouses, children and parents)
  26. Immediately: BoG should first set up an internal financial stability committee which reviews the BoG's internal supervision and licensing reports. It is important that BoG audits these internal reports prior to any steps being taken in coordination with other regulators. This committee should comprise internal and external members and be similar in standing to MPC. Given that BSD has internal shortcomings, it is important to introduce this external supervision. The new committee will be a committee of BoG's board
  27. Immediately after BoG Financial Stability Committee is set up: BoG should establish an inter-regulatory committee comprising of Securities and Exchange Commission, National Insurance Commission, Financial Intelligence Centre, Ghana Stock Exchange, National Pensions Regulatory Authority and Central Securities Depository to review findings of Eagle project report and to agree a process for strengthening the regulatory framework for the financial services industry
  28. Immediately: Inter-regulatory committee to establish a sanction register list published quarterly to be used in screening ownership, board directorship of sanctioned persons
  29. Immediately: Outcome of regulatory breaches identified by findings of receivers and sanction list to be referred for criminal review and prosecution
  30. Immediately: Investigate related and connected businesses to ascertain beneficial ownership by ex-shareholders and ex-directors of Capital bank and UT bank.
  31. Immediately: BoG should extend the Asset Quality Review by KPMG to cover 2017
  32. Immediately: BoG to review green and brownfield licensing procedures
  33. Immediately: BoG to ensure cash escrow of capitalization
  34. Immediately: Developments and implementation of an industry standard Governance Code of Conduct
  35. Immediately: Annual certifications should be required of all Directors on Financial Risk Management
  36. Immediately: Quarterly certification by Board of Directors and key management of adequate disclosure on related and connected party transactions
  37. Immediately: A two (2) year cooling-off period should be established for former BoG employees as consultants and acceptance of board directorships in any institution regulated by BoG
  38. Immediately: Institute a quarterly certification of BSD key management, licensing and examiners on their dealings with any regulated financial institution
  39. Immediately: Our recommendation is that liquidity support should be issued as a collateralized credit facility to be drawn down on need basis rather than a pool of cash availed to a bank. Every drawdown should be approved for a specific utilization by a BoG appointed advisor. This adviser should also serve on the board of the recipient bank and any drawdown must be accompanied by a note from the recipient's auditors confirming that the recipient is a going concern as well as a memorandum which is circulated to members of the financial stability committee.

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