Happenings at UT Bank, Capital Bank should be a wake-up call

The Bank of Ghana (BoG) has eventually heavily dropped the sledgehammer on two commercial banks in the country — UT Bank and Capital Bank — by asking the second biggest bank, the GCB Bank, to take over their ownership.

The takeover emanated from the inability of the two banks to meet regulatory requirements on capital position, prompting the BoG to place them under care and maintenance for almost two years.

While under the life support, attempts to resuscitate them failed, after each of their over 20 restructuring and capital restoration plans are said to have been outrightly rejected by the BoG as being incredible.

In the event, the central bank had no option but to fall on the Banks and SDI Act, 2016 (Act 930), which provides that under-capitalised banks be given 180 days to correct their capital position or face sanctions, one of which was the takeover.

The Daily Graphic, though aggrieved by the turn of events, fully supports the Governor of the BoG, Dr Ernest Addison, who said at a press conference yesterday that the UT Bank and the Capital Bank were heavily deficient in capital and liquidity and their continuous operation could have “jeopardised not only their depositors’ funds but also posed a threat to the stability of the financial system”.

To us, this action, which has lingered for some years, comes at a time when the industry regulator is taking steps to restore sanity in the financial services industry which, for some time now, has been plagued by mismanagement and violation of banking guidelines.

It has fast become the norm for microfinance institutions to metamorphose into savings and loans companies and eventually transit to become universal banks.

Unfortunately, however, they fail, due to the huge financial outlay, to hire the best of staff to manage their risk departments, and rather opt for staff who may not be up to the task.

For many reasons, including political interference, the industry regulator is unable to act to ensure sanity and that is the reason many highly mismanaged institutions continue to exist, only to fall after their customers have invested fortunes in their operations.

We trust that this action by the BoG will send strong signals to other banks to put their house in order or face similar actions.

They need to emulate the bigger and older banks as far as risk management is concerned in order not to fall prey to charlatans who are parading as bankers when, in fact, they connive with other business people outside the banks to take loans and refuse to pay.

It is unfortunate that at 60 years, Ghana is facing such challenges. We urge the BoG to be steadfast and swift in the future with its actions to prevent a similar occurrence.

We further urge the Securities and Exchange Commission (SEC) and the Ghana Stock Exchange (GSE) to live up to expectation by ensuring that they take the right actions against listed companies that continually fall foul of their regulations.

It is completely unacceptable that the two institutions treated one of the affected banks with kid gloves from the beginning, only for them to be caught pants down in a situation where shareholders will now have to face the brunt of their inaction.

Finally, we urge all the regulatory bodies in the country to up their game to ensure that the various institutions they regulate play strictly by the rules or exit.