Sanction uniBank Board of directors - Former deputy Governor recommends

A banking consultant and former Deputy Governor of the Bank of Ghana (BoG), Mr Emmanuel Asiedu-Mante, has taken a swipe at the board of directors of embattled uniBank Ghana Limited for failing to rescue the bank from financial distress, a phenomenon that eventually led to its insolvency.

Beyond being an indictment on their professional competences, Mr Asiedu-Mante said the Bank of Ghana’s revelations on the state of the bank prior to handing over its management to KPMG for six months demonstrated that “the directors were not fit to occupy those positions.”

He said it also showed that uniBank’s board shirked its oversight responsibility, resulting in the persistent deterioration in the capital position of the bank, rising non-performing loans (NPLs), worsening reserve ratio and heavy exposure to BoG’s emergency liquidity assistance (ELA), which then prompted the central bank to intervene.

Poor corporate governance

On March 20, the BoG announced that uniBank, which had been facing insolvency and liquidity challenges over the past two years, had been placed under the management of auditing and accounting firm, KPMG as the official administrator.

The decision empowers KPMG to take management control over the bank, with powers that replace those of the shareholders, board of directors and senior management, the Governor of the central Bank, Dr Ernest Addison, said.

The action was to salvage the fortunes of the bank which had deteriorated in recent times, forcing its capital adequacy ratio to plummet to negative 24 per cent and exposure to BoG’s ELA to firm up to GH¢2.2 billion in two years.

“Despite persistent pleas for extension over the past year, the shareholders have failed to restore the bank to regulatory capital and liquidity levels. The bank’s current situation reflects its poor corporate governance and risk management practices that rendered the bank vulnerable to macroeconomic shocks,” Dr Addison said at the March 20 news conference.

Need for sanctions

Mr Asiedu-Mante, who oversaw the liquidation of the Bank for Housing and Construction in the year 2000 (as Head of BoG’s Banking Supervision Department), said his experience on boards showed that uniBank’s board was negligent.

“Every month, when you meet, the management has to furnish you the board with every information that transpired in the previous month so that you get to know where you are and to be able to give policy directions on the way forward.

“If that were happening in the case of uniBank, we won’t be where we are because they would have been informed much earlier through the returns and data generated by the management that the bank was heading for trouble and in which case, they would have taken action even before the supervisor steps in,” Mr Asiedu-Mante said.

Just like their counterparts in the defunct UT and Capital banks, he said the events showed that the directors of uniBank were “reckless” in the exercise of their oversight responsibilities, hence the persistence of the bank’s liquidity crisis, leading to its insolvency.

“The whole board of that bank needs to be sanctioned,” he said insisting that the BoG decision to put uniBank under administration for six months meant the central bank had tried without success to help reverse the fortunes of the bank.

New rules

He said revelations by the BoG that uniBank submitted capital restorations plans that were not credible showed that the board did a poor job.

“What sort of plan is that? You do not have enough capital, you have been given a running period, may be one year and you submit a plan that is not working? then it means you did a poor job,” he said.

In an apparent affirmation of Mr Asiedu-Mante’s position, corporate governance expert and former Director-General of the Securities and Exchange Commission (SEC), Dr Adu Anane Antwi said the role of a director was honour that people appointed to boards need to be “very concerned about what happens in their companies.”

“Everything that happens in the bank, you will be held responsible for and that is the bottom line.

“It is a serious matter and that is why we normally tell people to be very concerned, review things and raise questions to understand what is happening and if there are sanctions that people have to face, then you let them go through,” he said.

Meanwhile, the BoG has issued new regulations on corporate governance to police the operations of financial institutions in the country.

The directives, titled ‘Banks and Specialised Deposit-Taking Institutions Corporate Governance Directive, 2018,’ are in line with Section 92(1) of the Banks & Specialised Deposit Taking Institutions Act, 2016 (Act 930)).–GB