George Smith-Graham: I'm determined to pursue appeal against BoG's disapproval of my appointment as UMB Board Chair

George Smith-Graham, a former independent director of the UMB Bank also a former CEO of the Fair Wages and Salaries Commission (FWSC) says he is determined to pursue an appeal against the Bank of Ghana's (BoG) disapproval of his appointment as Board Chairman of Universal Merchant Bank (UMB).

Mr George Smith-Graham, is accusing the BoG of arbitrarily amending the requirements of the Banks and Specialised Deposit-Taking Institutions Act 2016 (Act 930) and the Corporate Governance Directive 2018.

According to him, “this overreach by the BoG is not only unlawful, but also threatens the stability of the banking sector.”

The High Court in Accra on July 10, 2024, dismissed an application George Smith-Graham filed for judicial review as a former director of UMB, against the Bank of Ghana (BoG).

The case stemmed from events beginning on July 22, 2022, when the BoG issued a directive under the Banks and Specialised Deposit-Taking Institutions Act (Act 930) and the Corporate Governance Directive 2018. 

This directive required all commercial banks, including Universal Merchant Bank Ltd (UMB), to obtain prior written "No Objection" from BoG before redesignating an existing non-executive director to any other position.

Universal Merchant Bank (UMB) is a full-service financial institution specialising in customized banking products and services.

On July 5, 2023, UMB appointed Smith-Graham, a non-executive director, as its board chair during an emergency board meeting. 

However, UMB reportedly failed to comply with the BoG's 2022 directive by not obtaining BoG's prior written "No Objection" for this appointment.

The BoG informed UMB of its breach and directed the bank to apply for the required "No Objection." UMB refused, claiming its lawyers advised that such approval wasn't necessary. 

Consequently, the BoG revoked its approval of Mr. Smith-Graham's appointment as a UMB director, exercising its powers under Act 930.

Mr Smith-Graham then filed for judicial review of this revocation. 

He argued that section 102 of Act 930 didn't grant BoG the power to revoke his directorship, and even if it did, he was entitled to a hearing. 

The BoG maintained it had the authority to revoke the appointment under the same section.

Two years after, the High Court in Accra ruled in favour of the BoG, stating that Act 930 was designed to enhance BoG's supervisory powers for maintaining stability in the banking sector. 

It interpreted Section 102 as granting BoG broad powers to address violations of its laws and regulations, including the removal of directors.

The High Court rejected George Smith-Graham's argument that BoG couldn't revoke a director's appointment without a hearing. 

It also found that the correspondence between the parties constituted a form of hearing, and that the applicant, as both director and Chairperson of UMB, couldn't claim ignorance of this correspondence.

Furthermore, the court held that the Companies Act, 2019 (Act 992) doesn't limit BoG's powers under Act 930, and that Act 930, being specific to banking regulation, takes precedence over Act 992's general provisions regarding director removal.

The application was dismissed as unmeritorious, with the Court concluding that the applicant failed to prove that BoG had exercised its power corruptly, irrationally, capriciously, or unreasonably.

George Smith-Graham's response to High Court decision

However, in a statement reacting to the High Court decision, Mr Smith-Graham indicated his determination to pursue an appeal. 

In the statement he titles, “Setting the records straight: The Republic v The Bank of Ghana; Ex parte George Smith-Graham, he said, he respected the High Court’s decision, but felt compelled to clarify his position due to the broader implications of the BoG's conduct, while stating that he was going to appeal the High Court’s decision, which in his view, “neglected the essential legal issue of whether the BoG, could by a letter, impose additional requirements on banks to seek “no objections” from the BoG when such requirements are not contained in Act 930 or the Corporate Governance Directives.”

Mr Smith-Graham said he was approved by BoG as an independent director of a bank. 

When the chairmanship of the board of directors of the bank became vacant, he was elected as the chairman of the Board of Directors, and the BoG was duly notified of this appointment. 

The BoG insisted that the bank needed a no-objection before he could serve as the chairman of the Board as stated in a letter they had written dated July 22, 2022, which referenced Act 930 and the Corporate Governance Directive 2018. 

The bank disagreed with the BoG’s interpretation of the law and sought legal advice. 

The legal advice indicated that neither Act 930 nor the Corporate Governance Directives 2018 required an independent director already approved by the BoG to seek a “no-objection” from the BoG, before serving as the chairman of the Board of a bank. 

The Bank communicated this position to the BoG. 

“Unexpectedly, the BoG issued a letter revoking approval for my appointment as an independent director without any prior notice to me or the Bank,” Smith-Graham stated in the letter.

He stated further that “this was surprising because the point of difference between the BoG and the bank concerned whether an already approved independent director required a “no-objection” from the BoG before being appointed and serving as the chairman of the Board of a bank. 

“My lawyers have advised me, and I believe this to be true, that the BoG cannot use a letter to amend the requirements of Act 930 and the Corporate Governance Directives, 2018, as it sought to do in this case.”

According to Smith-Graham,  “the BoG has been abusing the approval process for directors and key management personnel, instilling fear among industry professionals. 

“Many are hesitant to challenge unlawful edicts from the BoG, fearing that their requests for approval to serve in key management positions would be denied.” 

He added that the conduct of the BoG in this matter, if left unchallenged, posed a grave danger to good governance in the banking sector and could lead to a breakdown of discipline within the sector. 

He also noted that the notion that a board could not reassign already approved key management personnel of a bank, contradicted established corporate governance principles. 

Smith-Graham said, “the BoG’s attempt to micromanage banks undermines the authority of bank boards to manage their employees and imposes undue restrictions on top management. 

“It is crucial to emphasise that regulatory bodies, such as, the BoG should not use administrative letters to amend or override the provisions of an Act of Parliament or legal instructions, such as, the Corporate Governance Directives, 2018. 

“Allowing such letters, mischievously labelled as directives, to stand would gravely affect the operations of banks.” 

He said with these convictions he would pursue an appeal.

Attached below is a copy of his response

Setting the Record Straight: The Republic v The Bank of Ghana; Ex parte George Smith-Graham

I have taken note of the recent media publications regarding the High Court's ruling in the case involving myself and the Bank of Ghana (BoG). 

While I respect the court's decision, I feel compelled to clarify my position due to the broader implications of the BoG's conduct in these matters. 

I was approved by the BoG as an independent director of a bank. 

When the chairmanship of the board of directors of the bank became vacant, I was elected as the chairman of the Board of Directors, and the BoG was duly notified of this appointment. 

The BoG insisted that the bank needed a no-objection before I could serve as the chairman of the Board as stated in a letter they had written dated July 22, 2022, which referenced the Banks and Specialised Deposit-Taking Institution Act 2016 (Act 930) and the Corporate Governance Directive 2018. 

The bank disagreed with the BoG’s interpretation of the law and sought legal advice. The legal advice indicated that neither Act 930 nor the Corporate Governance Directives 2018 required an independent director already approved by the BoG to seek a “no-objection” from the BoG before serving as the chairman of the Board of a bank. 

The Bank communicated this position to the BoG. 

Unexpectedly, the BoG issued a letter revoking approval for my appointment as an independent director without any prior notice to me or the Bank. 

This was surprising because the point of difference between the BoG and the bank concerned whether an already approved independent director required a “no-objection” from the BoG before being appointed and serving as the chairman of the Board of a bank. 

My lawyers have advised me, and I believe this to be true, that the BoG cannot use a letter to amend the requirements of Act 930 and the Corporate Governance Directives, 2018, as it sought to do in this case. 

This overreach by the BoG is not only unlawful but also threatens the stability of the banking sector. 

The BoG has been abusing the approval process for directors and key management personnel, instilling fear among industry professionals. 

Many are hesitant to challenge unlawful edicts from the BoG, fearing that their requests for approval to serve in key management positions would be denied. Unfortunately, in its judgment, the High Court failed or neglected to address the essential legal issue of whether the BoG could, by a letter, impose additional requirements on banks to seek “no objection” from the BoG when such requirements are not contained in Act 930 or the Corporate Governance Directives, 2018.

As previously stated, the conduct of the BoG in this matter, if left unchallenged, poses a grave danger to good governance in the banking sector and could lead to a breakdown of discipline within the sector. 

The notion that a board cannot reassign already approved key management personnel of a bank which is also contained in the same letter referenced above contradicts established corporate governance principles. 

The BoG’s attempt to micromanage banks undermines the authority of bank boards to manage their employees and imposes undue restrictions on top management. 

It is crucial to emphasise that regulatory bodies, such as, the BoG should not use administrative letters to amend or override the provisions of an Act of Parliament or legal instructions, such as, the Corporate Governance Directives, 2018. 

Allowing such letters, mischievously labelled as directives, to stand would gravely affect the operations of banks. 

In the light of these concerns, I am determined to pursue an appeal. 

My commitment is to uphold the principles of good governance, transparency, and accountability within the banking industry. 

The outcome of this appeal will have significant implications for the governance and operational integrity of the sector. I call upon all stakeholders to support efforts to maintain a fair and just regulatory framework. 

Enclosed is a copy of the letter the BOG now claims is a directive which has no basis both under the Banks and Specialised Deposit-Taking Institution Act, 2016 (Act 930) and the Corporate Governance Directives, 2018. 
 
Issued by George Smith-Graham