Ghana Amalgamated Trust PLC - Rejoinder to GAT, its role in financial sector in Graphic Business

Ghana Amalgamated Trust Plc (GAT) appreciates the public interest in its activities and welcomes discussions around its role in Ghana’s financial sector.

However, the recent article published in the Daily Graphic Business on Saturday, November 9, 2024 titled: "Accountability and transparency in GAT’s operations" by Korsi Dzokoto contains several misrepresentations, factual inaccuracies and unsubstantiated conclusions.

We find it necessary to address various misrepresentations, inaccuracies and unsubstantiated conclusions presented in the piece. This statement aims to clarify GAT’s mandate, achievements and ongoing efforts to support the stability of Ghana’s financial ecosystem. 

• Clarifying GAT's mandate, objectives, impact

In December 2018, the Government of Ghana (GoG), acting through the Ministry of Finance (MoF), set up GAT to support selected indigenous banks to promote the stability of the banking sector.

GAT was established after several indigenous banks had challenges in raising funds to recapitalise by the December 31, 2018 deadline that the Bank of Ghana (BoG) had given all banks to increase their required regulatory capital.

The shareholders of some indigenous banks petitioned GoG to support them to recapitalise to preserve Ghanaian ownership in the banking sector as foreign-owned banks were largely able to get recapitalisation support from abroad.

GoG established GAT in response to this request from some indigenous banks. GAT’s core mandate was to help recapitalise the selected indigenous banks that faced significant challenges in meeting the increased minimum capital requirements (MCR) set by the BoG and to guide their transformation into viable and competitive institutions in the banking industry.

From the onset, GAT was designed to operate on a private equity model with GoG backing, acting as a strategic investor and partner in stabilising the banks, protecting Ghanaian depositors, and strengthening the financial ecosystem.

The positive impact of GAT in the banking industry includes the preservation of about 5,400 direct jobs and 20,000 indirect jobs as well as GHS 10.2 billion in deposits when it recapitalised and supported the selected indigenous banks in 2019 and 2020.

• Further clarification, debunking allegations

Once again, we deem it important to correct key misstatements and inaccuracies presented in the articles by the writer who did not engage GAT to get the correct facts about the company.

1.1 GAT Responses considered confrontational

Article Allegation: “However, despite its substantial capital injection and mission to serve the public good, GAT’s recent response to critical questions surrounding its operations appears confrontational rather than transparent.

As a public entity managing substantial government funds, GAT must uphold transparency, accountability and fidelity to its founding principles.”

GAT response: GAT’s objective in responding to the previous article by the same writer was to give clarity on its operations, correct factual inaccuracies and reinforce accountability and transparency in its operations as these were shared without compulsion.

As an example, in the earlier article recently published by the “Business & Financial Times”, the writer falsely claimed that “while GAT was initially introduced as a mechanism to support and revitalise these institutions, growing concerns suggest that it may now be serving a different purpose: enabling the government to acquire majority shares in local banks.”

This unfounded claim by the writer is false and we corrected this falsehood in our prior response. In our response, we gave the example of OmniBSIC Bank Ghana Limited (OmniBSIC) where GAT’s equity stake was reduced over time.

GAT’s ordinary equity shareholding was 44.05 per cent at OmniBSIC when GAT invested in the bank in February 2020. When further recapitalisation was needed, GAT encouraged the local shareholders to inject additional capital, resulting in a dilution of GAT’s equity stake from 44.05 per cent to 24.75 per cent as reported in the published financials of the company.

This example is the very opposite of what the writer falsely claimed about GAT. Moreover, our responses to his articles underscore our commitment to transparency and accountability. 

GAT’s role, public policy instrument

Article allegation: “GAT’s current operations appear to deviate from its original mission. Rather than functioning solely as a public policy mechanism, GAT’s structure has shifted towards a private equity-style model, where the focus appears to be on generating returns and consolidating ownership rather than directly supporting the beneficiary banks.

This deviation raises important questions about GAT’s objectives and whether it remains committed to its mission as a public policy tool.” 

AT response: As we stated in our earlier rejoinder to similar false claims by the writer, the perception of GAT shifting to a private equity-style model is misleading. GAT has never deviated from its mandate since its inception.

GAT was established on a private equity model from its inception and designed to bring a private sector approach solution to a public problem. In this respect, GAT originally planned to source funding from private sources, including pension funds, to support the banks, and to repay those funds at negotiated commercial rates. Private funds demand commercial returns.

However, delays in the fund-raising resulted in disadvantages for the selected indigenous banks under the GAT programme as they were less competitive when compared with their peers who had been capitalised from foreign sources of funds.

Hence, the GoG intervened with funding that enabled GAT to recapitalise the selected indigenous banks in a timely manner. The funding from GoG did not change the private equity model upon which GAT operated.

It is this private equity model that enables GAT to support the transformation programmes at the banks it recapitalised.

Article allegation: “When GAT was launched, it was expected to operate inclusively, helping as many local banks as possible to comply with new capital requirements and stabilise their operations.

Yet, only a select few banks received GAT’s support, leaving many others without access to the capital assistance necessary to survive… For those that could not raise the required capital on their own, their licences were revoked, forcing them to cease operations or merge into government-led entities such as the Consolidated Bank Ghana (CBG).”

GAT response: The writer falsely implies that because GAT did not support some indigenous banks that were unable to raise capital on their own, such banks had their licences revoked. It is important to clarify that regulatory actions against some banks were a separate matter from the GoG policy to use GAT to recapitalise selected indigenous banks.

Furthermore, the regulatory actions regarding some of the banks occurred before the December 31, 2018 deadline that the BoG had given all banks to recapitalise.

Regulatory actions against some banks occurred in August 2017, with the revocation of the licences of Capital Bank and UT Bank. Five more banks failed in August 2018, which culminated in the formation of Consolidated Bank Ghana (CBG).

The regulatory actions on these banks in August 2017 and August 2018 had nothing to do with GAT which was set up much later in December 2018. 
 

Transparency, reporting to Parliament

Article allegation: “Without transparent reporting, GAT’s operational model and financial decisions remain hidden from public scrutiny.

The absence of a status report raises questions about GAT’s effectiveness and accountability. A full report to Parliament would allow for an assessment of GAT’s performance, the impact on beneficiary banks and the returns generated from the GHS 800 million public investment.

It is time for GAT to provide this information, as Ghanaians have a right to know how their funds are being used.”

GAT response:

Contrary to the false claims in the article, GAT operates under the oversight of the MoF. GAT submits regular reports to its sponsoring ministry, the MoF, and meets the necessary statutory reporting requirements.

The company also provides periodic updates directly to the Parliament of Ghana via its finance committee including an update that GAT provided as recently as July 2024.

GAT was set up to be independent of GoG but has yet to sustain its operations on its own. To ensure such sustainable operations without reliance on GoG for annual funding, GAT provided the selected indigenous banks equity capital instead of loans, to avoid saddling them with additional debt.

GAT had to charge the investee banks minimal fees to support its operations. Regarding such management fees, some banks negotiated upfront one-time fees with GAT, while other banks chose recurring annual fees.

In either case, the management fees charged by GAT are moderate by industry standards (and below 50 per cent of typical industry fees) and as mentioned earlier, are necessary for sustaining our operations.

These fees cover essential costs associated with analysing and structuring the investments, monitoring and managing our investments, and ensuring that we maintain transparency, accountability and effectiveness in supporting the banks.

This structure allows us to fulfil our mandate efficiently, without compromising the stability and viability of the banks or imposing additional costs on taxpayers. 

GAT’s relationship, govt, NTHC

Article Allegation: “Given the government’s direct involvement in GAT’s ownership influenced by political considerations rather than purely economic or financial stability factors.”

GAT response: GAT operates independently within its mandate despite the GoG being its sole shareholder at present, acting through its nominee company, the National Trust Holding Company (NTHC). Our governance structure ensures accountability through a largely independent board led by experienced professionals from the banking sector.

This structure, therefore, does not place any significant government influence over the operations of GAT as alleged in the article.

Moreover, NTHC is only a nominee shareholder holding the shares in GAT on behalf of GoG. Thus, NTHC insulates GAT from GoG by ensuring that GAT deals on an arm’s length basis with its nominee shareholder rather than directly with GoG.

Hence, GAT receives policy guidance from the MoF but the GAT board implements its mandate independently. Overall strategic and governance decisions are taken by the independent board.

Furthermore, GAT has engaged professional firms with key expertise to support it in priority areas. Since its inception, KPMG handles GAT’s general administrative functions including sourcing, procurement, payments and payroll management, while Ernst & Young (EY) is GAT’s statutory external auditor.

This framework ensures transparency and adherence to best practices in financial management, accounting and corporate governance.

Contrary to the claims in the article, GAT operates under the oversight of the MoF. GAT submits regular reports to its sponsoring ministry and meets the necessary statutory reporting requirements.

The company also provides periodic updates directly to the Parliament of Ghana via its finance committee including an update that GAT provided as recently as July 2024.

Conclusion

The author had previously concluded that GAT had successfully implemented its mandate so to again proffer that “it has evolved into an entity that prioritises profit and government influence at the expense of indigenous banks and local shareholders…. an operating model that contradicts its founding mission, GAT has failed to deliver the intended support and transparency,” without doing any checks at GAT to corroborate his statement is disingenuous and misleading.

We have provided further explanations and examples to buttress our rejoinder that no such activities have taken place at GAT, and the company remains resolute in fulfilling its mandate of strengthening and protecting strategic Ghanaian interests in the financial sector.

Once again, our role extends beyond short-term profits; it is about creating a stable, resilient banking sector that can support Ghana’s long-term economic growth. 

 Managing Director, 
Ghana Amalgamated Trust Plc