EOCO warns directors of collapsed UT Bank to report or face…

The Economic and Organised Crime Office (EOCO) has said it may be compelled to take other actions if the directors of the collapsed UT Bank fail to voluntary appear and answer questions on their roles in the collapse of the bank.

EOCO issued public summons for the directors of the collapsed UT and Capital banks to appear and answer questions.

Whilst the directors of UT Bank were to appear before the acting Executive Director of EOCO Wednesday, March 28, 2018, that of Capital Bank are to appear on Wednesday, April 4, 2018.

However, as of 1pm Wednesday, the UT directors were yet to appear to respond to damning findings of an investigative report on the collapse of the bank.

Read also: EOCO summons directors of UT and Capital banks

In a radio interview with Accra based Citi FM, Mr K.K. Amoah, the acting Executive Director of EOCO cautioned they may be forced to take other measures if they fail to report.

“It’s a normal investigative process that we are doing, it is a complaint that we are investigating,” he said.

Asked if he had personally contacted the said directors Mr Amoah said, “I don’t even know them [in person], I’m looking for the directors, I don’t know anybody’s phone number, I don’t know their addresses, I don’t know any other information… so when we put out that information and you know that at a certain time, you were a director, you need to come [voluntarily].

“They read newspapers…, the bank has gone into receivership, who were the directors until the bank went into receivership…assuming there were to be a publication that these people are to report to the President’s office for a discussion, will they say that they have not been invited,” Mr Amoah added.

Background

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 subsequently approved a purchase and assumption transaction with the GCB Bank Ltd that transfered 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 the 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.