EOCO summons directors of UT and Capital banks

The Economic and Organised Crime Office (EOCO) has summoned the directors of the collapsed UT and Capital banks to answer questions on their roles in the collapse of the two banks.

The summons follow damning findings of an investigative report on the collapse of the two banks which was submitted to the Bank of Ghana (BoG).

The Daily Graphic has gathered that the directors of UT Bank will appear before the acting Executive Director of EOCO at 9:30 a.m. tomorrow, Wednesday, March 28, 2018, while the directors of Capital Bank are to appear on Wednesday, April 4, 2018.

The BoG, in August last year, revoked the licences of UT Bank and Capital Bank due to severe impairment of their capital.

The central bank has approved a purchase and assumption transaction with the GCB Bank Ltd that transfers all deposits and selected assets of UT and Capital banks to the GCB Bank Ltd.

The liabilities of the two banks, according to the central bank, overwhelmed their assets, leaving the BoG with no option but to undertake a purchase and assumption transaction as the least costly method of dealing with a collapse.

The banks were “unable to develop an acceptable plan”, according to the BoG, although it made efforts to help both banks to recover through private alternatives.

However, the owners and managers of the UT and Capital banks were unable to increase the capital of the banks to address the insolvency.

Key investigative findings

The investigative report revealed, among other key findings, that the two liquidated banks were run by owner chief executives, with complete disregard for internal rules and banking regulations.

The directors of two banks would be made to answer questions on how they singularly made decisions on credit extension and breached all the rules regarding related party transactions and connected lending.

The Governor of the BoG, Dr Ernest Addison, at the inauguration of the new Ecobank Ghana Head Office in Accra earlier this month, said the two banks suffered from weak corporate governance standards.

“The principal factors that caused the demise of the two banks were very poor banking practices existing within the banks,” he said.

The central bank assured the public that it had sharpened its focus on a strong supervisory regime that effectively identified threats to safety, soundness and stability in the financial sector.

“In this regard, the BoG is transiting from the current capital measurement framework to a risk-based capital requirement based on the key Basel II and III pillars,” the governor said.

Restructuring banking sector

The takeover of two banks at the same time will be the first and biggest in the history of the banking industry in Ghana.

The development is part of moves by the government, through the BoG, to restructure the banking sector.

The move is to rescue the two from further challenges, as both balance sheets are currently in the red.

It is expected that the assets and liabilities of the two banks will be realised and settled respectively through a receivership process to be undertaken by Messrs Vish Ashiagbor and Eric Nana Nipah of PricewaterhouseCoopers (PwC).

The purchase and assumption agreement allows the GCB Bank to take over all deposit liabilities and selected assets of both the UT and Capital banks, per Section 123 of the Banks and Specialised Deposit-Taking Institutions (SDIs) Act, 2016 (Act 930).

Celebrated brands

The news of the collapse of the two banks had shocked many, since the two banks had won numerous awards for performing successfully in the industry.

Just a year ago, Capital Bank swept three awards at the Ghana Banking Awards. The bank was once named as one of Ghana’s Most Respected Companies.

It was also adjudged the Best Growing Bank, the Best Bank in Deposits & Savings and the Best Bank in Household/Retail Banking at the 15th Edition of the event, while UT Bank was adjudged Best Bank in 2011 by the same institution.

UT Bank is one of Ghana’s most celebrated brands, after it evolved from a microfinance company into a successful bank.