Parliament to demand tough measures from financial sector regulators

Parliament is expected to task the regulatory bodies in the financial sector – Bank of Ghana (BoG) and the Securities and Exchange Commission (SEC) – to not hesitate in dealing with recalcitrant players to maintain sanity and trust in the industry.

A source close to the Finance Committee of Parliament told B&FT the legislative body will issue a directive in that regard, based on the outcome of hearings the committee had with the BoG and SEC after the collapse of UT and Capital banks.

Earlier in August, the BoG revoked the licenses of UT and Capital banks explaining that “this action has become necessary due to severe impairment of their capital”, where the two bank’s liabilities overwhelmed their assets and led to the BoG deeming a Purchase and Assumption transaction as the least costly method of dealing with the situation.

The Central Bank said there were repeated agreements between it [BoG] and the collapsed banks to implement an action plan to address these significant shortfalls. However, the banks were unable to increase their capital to address the insolvency”.

Following the eventual takeover of the two local banks by GCB Bank, the Finance Committee of Parliament sought to find out from stakeholders associated with the transaction what exactly led to the collapse of the two entities and what processes led to the takeover.

Officials from the BoG, PWC (the Receiver), SEC, Ghana Stock Exchange (GSE) and GCB Bank were reportedly probed by the Committee during a closed-door session.

According to a source with knowledge of the Committee sittings, the hearings were significant to give Parliament a clear understanding of why the banks took a nosedive and how regulators managed the transaction.

The Finance Committee, the B&FT understands, was keen to determine whether or not the collapse of the banks was a result of regulatory failures or unavoidable challenges that the affected banks suffered.

And the meeting was conducted in camera in order not to derail the official ongoing investigations by the Receiver, following the transaction.

Purchase and Assumption agreement allows GCB Bank to take over all deposit liabilities and selected assets of both UT Bank and Capital Bank, per section 123 of the Banks and Specialised Deposit-Taking Institutions (SDIs) Act, 2016 (Act 930).

The BoG, in its statement, said the GCB Bank took over UT Bank and Capital Bank “as part of efforts to extend their reach and grow their balance sheet to position them to support large transactions in a fast-growing economy.”

The BoG further stated that the takeover is to strengthen Ghana’s banking sector, ensure financial stability, and protect depositors’ funds.

By: Eugene Davis and Bernard Yaw Ashiadey | thebftonline.com | Ghana