BoG revokes licenses of 23 S&L companies

The Bank of Ghana has finally put paid on insolvent savings and loans companies, with renowned ones including GN Savings and Loans and Ideal Finance been part of the 23 banks whose licenses have been revoked.

The other banks affected by this move include Women’s World Bank Savings and Loans, Unicredit Savings and Loans Ltd, Global Access Savings and Loans Company Ltd, Accent Financial Services Ltd, Midland Savings and Loans Company Ltd, First Allied Savings and Loans Co. limited, among others.

According to a  statement released by the central bank on Friday, it said the revocation was because the banks had become insolvent even after a reasonable period within which the Bank of Ghana had engaged with them in the hope that they would be recapitalized by their shareholders to return them to solvency.

Below is the full statement from the BoG :

The Bank of Ghana has, with effect from today, revoked the licences of twenty-three (23) insolvent savings and loans companies and finance house companies.

The Bank of Ghana has, with effect from today, revoked the licences of twenty-three (23) insolvent savings and loans companies and finance house companies (see Annex 1).

These actions were taken pursuant to Section 123 (1) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), which requires the Bank of Ghana to revoke the licence of a Bank or Specialised Deposit-Taking Institution (SDI) where the Bank of Ghana determines that the institution is insolvent. The Bank of Ghana has alsoappointed Mr. Eric Nipah as a Receiver for the specified institutions in line with section 123 (2) of Act 930.

The revocation of the licences of these institutions has become necessary because they are insolvent even after a reasonable period within which the Bank of Ghana has engaged with them in the hope that they would be recapitalized by their shareholders to return them to solvency. It is the Bank of Ghana’s assessment that these institutions have no reasonable prospects of recovery, and that their continued existence poses severe risks to the stability of the financial system and to the interests of their depositors.

In line with the Government’s commitment to protect depositors’ funds, the Government has made funds available to enable the Receiver pay depositors after their claims are validated. The Receiver will in due course make an announcement with regards to when and where payments will be made. The Receiver will also indicate documents required from depositors to facilitate the validation of claims and orderly payment of validated deposits. Other creditors of the failed institutions will be settled by the Receiver upon validation of their claims and to the extent that the Receiver is able to realise value from the remaining assets of these institutions.

The Bank of Ghana has also with effect from today, revoked the licences of two nonbank financial institutions, namely Express Funds International Ltd (remittance company) and Ghana Leasing Company Ltd (leasing company) which are insolvent and have been inactive for a number of years. This action is pursuant to Section 7 of the Non-Bank Financial Institutions Act, 2008 (Act 774), which mandates the Bank of Ghana to revoke the licence of a non-bank financial institution licensed under that Act if that institution among other things ceases to carry on business. The Bank of Ghana has notified the Registrar of Companies of the revocation of these two licences and has requested that the Registrar commences winding-up proceedings against these companies under the Bodies Corporate (Official Liquidations) Act, 1963 (Act 180).

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Background

As part of its efforts to restore confidence in the banking and specialized deposit-taking sectors, the Bank of Ghana embarked on a clean-up exercise in August 2017 to resolve insolvent financial institutions whose continued existence posed risks to the interest of depositors.

A comprehensive assessment of the savings and loans and finance house sub-sectors carried out by the Bank of Ghana in the last few years, identified serious challenges (see Annex 2), summarized as follows:

  1. The levels of capital held by some savings and loans companies and finance house companies were in violation of the minimum regulatory capital required by Act 930. This made it precarious for these institutions to continue to undertake the business of specialised deposit-taking institutions, given the risks they posed to their depositors and other counterparties to whom they were exposed directly or indirectly;
  2. Excessive risk-taking without the required risk management function to manage risk exposures;
  3. The use of depositors’ funds to finance personal or related-party projects or businesses on terms that were not commercial, leading to little or no income accruing to the relevant savings and loans companies or finance house companies and thereby compounding their liquidity challenges;
  4. Corporate governance weaknesses with weak Board oversight, poor accountability, and override of internal controls;
  5. Creative accounting practices and under-provisioning for impaired assets, thereby misrepresenting their true financial condition to the Bank of Ghana and other stakeholders; and
  6. Persistent regulatory breaches, involving non-compliance with Bank of Ghana’s prudential rules, and failure to implement Bank of Ghana on-site examination recommendations.

All efforts by the Bank of Ghana to get the shareholders and directors of the affected institutions to rectify the above lapses, especially the significant capital deficiencies, yielded no positive results. Consequently, the financial position of these institutions has continued to deteriorate, leading to their insolvency with some of them ceasing operations and closing their offices to depositors whiles those currently in operation are unable to pay depositors and other creditors at all or fully.

Given the risks that these institutions continue to pose to the entire financial system and the need to protect the interest of depositors, the Bank of Ghana is sanitizing this subsector through the orderly resolution of the failed institutions in accordance with Sections 123 to 137 of Act 930.

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The Bank of Ghana has with effect from today, completed the clean-up of the banking, specialized deposit-taking (SDI), and non-bank financial institutions (NBFI) sectors which began in August 2017. This follows the revocation of the licences of nine (9) universal banks, 347 microfinance companies (of which 155 had already ceased operations), 39 micro credit companies/money lenders (10 of which had already ceased operations), 15 savings and loans companies, eight (8) finance house companies, and two (2) non-bank financial institutions that had already ceased operations.

The Bank of Ghana is committed to ensuring that the banking, SDI, and NBFI sectors remain resilient, inclusive, and supportive of Ghana’s economic growth trajectory. To ensure that the remaining institutions remain resilient going forward, the Bank of Ghana will remain vigilant, intensify on-site examinations and enforcement actions including the application of sanctions for non-compliance with statutory, prudential and other requirements, and ensure that early warning signs of distress are mitigated by regulated institutions expeditiously.

The Bank of Ghana will also work with ARB Apex Bank to reposition the rural and community banking sector, to enable them to better support rural economic development. Furthermore, the Bank of Ghana and the Government of Ghana will also launch the commencement of operations of the Ghana Deposit Protection Scheme in September 2019 to further strengthen protection of depositors’ interests.

LIST OF TWENTY-THREE (23) INSOLVENT INSTITUTIONS WHOSE LICENCES HAVE

BEEN REVOKED

  1. NAMES OF INSOLVENT INSTITUTIONS NATURE OF LICENSE

1 Accent Financial Services Ltd-Finance House

2 Adom Savings and Loans Ltd-Savings and Loans Company

3 AllTime Finance Ltd-Finance House

4 Alpha Capital Savings and Loans Ltd-Savings and Loans Company

5 ASN Financial Services Ltd-Savings and Loans Company

6 CDH Savings and Loans Ltd. Savings and Loans Company

7 Commerz Savings and Loans Ltd-Savings and Loans Company

8 Crest Finance House Ltd-Finance House

9 Dream Finance Company Ltd-Finance House

10 Express Savings and Loans Company Ltd-Savings and Loans Company

11 First African Savings & Loans Company Ltd-Savings and Loans Company

12 First Allied Savings and Loans Co. Ltd-Savings and Loans Company

13 First Ghana Savings and Loans Co. Ltd- Savings and Loans Company

14 FirstTrust Savings and Loans Ltd-Savings and Loans Company

15 Global Access Savings and Loans Company Ltd- Savings and Loans Company

16 GN Savings and Loans Ltd-Savings and Loans Company

17 Ideal Finance Ltd- Finance House

18 IFS Financial Services Ltd- Finance House

19 Legacy Capital Savings and Loans Ltd -Savings and Loans Company

20 Midland Savings and Loans Company Ltd.- Savings and Loans Company

21 Sterling Financial Services Ltd. -Finance House

22 Unicredit Savings and Loans Ltd. -Savings and Loans Company

23 Women’s World Banking Savings and Loans Co. Ltd.-Savings and Loans Company

 

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