A 2014 Bank of Ghana (BoG) Examination and Inspection Report has revealed the level of complicity of shareholders in the defunct UT and Capital Banks, and the central bank’s laxity in its supervisory role.
First, Capital Plus Savings and Loans became a full tier-1 bank by re-engineering capital amounting to GH¢56million through a suspect placement to local financial institutions by the shareholders; thus, the savings and loans company became a universal bank with no additional capital.
While the shareholders of First Capital Plus Savings and Loans re-engineered capital amounting to GH¢56million through a suspect placement to local financial institutions by the shareholders, BoG officials were lax in their role and failed to stop what would later become a full-blown crisis that required millions of tax-payers money to fix.
“The initial transactions imply willful deceit at the conversion stage from a saving and loan to a full tier-1 banking licence. At this stage, the shareholders appeared to ‘re-engineer capital amounting to GH¢56million through a suspect placement to local financial institutions,” noted the report, authored by Boulders and Advisors Limited.
Two clear years after the finding by Boulders and Advisors, the Banking Supervision Division (BSD) of the Bank of Ghana granted an ‘approval in principle’ for the non-existent investment of GH¢482.4million to be structured into a loan facility to be paid by the four major shareholders over a five-year period.
“On March 30, 2016, the CEO of the Capital Bank wrote to the Head of Banking Supervision requesting that a non-existent investment of GH¢482.4million, which included the GH¢56million, should be converted into a five-year debt.
“The BSD in a letter dated June 3, 2016 referenced BSD/52/2016 to the Managing Director of Capital Bank, that the BoG had granted approval in principle for the non-existent investment of GH¢482.4million to be structured in a loan facility to be paid by the following shareholders over a period not to exceed five years: Ato Essien, Oheneba Osei Akoto, Stephen Enchill and Kingsley Atta Ghansah,” the report noted.
The action taken by the BoG has been described by some analysts as a clear dereliction of its duty to protect depositors’ funds.
The report aptly noted that: “This action granted by the BoG could have been avoided in 2015 when the Risk Assessment report indicated that no capital had been introduced into the bank for the Class 1 Licence”.
Shareholders’ complicity, Board’s weak oversight
The complicity of shareholders in defunct Capital Bank and the weak oversight of the Board are at the core of the financial indiscipline, crisis and ultimate collapse of the indigenous bank.
The 2014 Bank of Ghana (BoG) Examination and Inspection Report noted that the major shareholder, William Ato Essien, flouted banking and risk management rules and treated depositors’ funds and public funds as his personal ‘piggy-bank’.
“He used depositors’ funds totalling GH¢80million to invest in business ventures such as: Ghana-Ocean Spring Mineral Water; Brictling Services; Gye Nyame Realty Limited; Capital and More Co. Limited; Accent Financial Services and Limited; ESICH Life Assurance Limited; and Capital Africa Group,” the report noted.
In Zimbabwe, depositors and public funds were used in setting up First Capital Plus LLC, Gye Nyame Resources LLC, and Bill Mine LLC.
Essien Swiss International Capital Holdings (ESICH) was also set-up in South Africa in a similar fashion.
The report cites “Nordea Capital, Commerz Savings and Loans and Sovereign Bank” as related companies to Mr. Essien.
In the case of UT Bank, the report found that CEO and Director, P.K Amoabeng, received GHȼ 5million from a loan defaulting entity – Kofi Jobs Limited, but the said payment was not disclosed to the Board of the bank. Risk management was also weak in the bank.
Liquidity support and ‘dummy’ companies
UT Bank and Capital Bank were both on liquidity support of GH¢860million and GH¢610million respectively as at the date of the Purchase and Assumption by GCB in August 2017.
UT, according to documents available to the B&FT, used its liquidity support of GH¢860million from the central bank to pay off maturing obligations and international credit lines which had crystalised.
Out of the GH¢610million liquidity support received from the BoG by Capital Bank, GH¢27.5million was used for business promotion that was handled by a board member; GH¢23.9million was transferred to IFS; GH¢65million was transferred to Nordea Capital; and GH¢130million was transferred to Alltime Capital.
The liquidity support of GH¢65million transferred to Nordea Capital and the GH¢130million transferred to Alltime Capital was then used to set up a new bank, Sovereign Bank.
“The placement of GH¢1340million with Alltime Capital and GH¢65million with Nordea Capital were a round-tripping of the liquidity support from the Bank of Ghana to set up Sovereign Bank.”