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Shareholders, ex-directors of Capital Bank and 2 others banned from financial market

Shareholders and ex-directors of three defunct banks – UT, Capital and Sovereign banks have been banned from Ghana’s financial market with immediate effect.

The embargo is expected to last for a period of five years.

This was contained in a document titled “Eagle Project,” a roadmap used by the Bank of Ghana in handling the aftermath of the collapse of UT and Capital banks.

According to the Eagle Project, all shareholders and ex-directors of Capital bank, UT bank and Sovereign Banks were to immediately “undertake a written commitment of prohibition from any financial market institution for a period of 5 years.”

Their shareholders and directors were also supposed to declare their assets.

Background

The Bank of Ghana announced the collapse of two local banks – UT and Capital banks – a year ago because they were “deeply insolvent.”

BoG allowed the GCB bank to acquire the banks and issued a GHc2 billion bond to clear the debt left behind.

That was the first time the central bank was taking such decision against a financial institution in the history of Ghana’s banking regime.

Subsequently, a leaked investigative report supposedly commissioned by the central bank showed that officials of Capital bank and UT squandered a total of GHc1.4 billion liquidity support given them by the central bank.

The report also noted that instead of using the money to resuscitate banks, their management, diverted the money for other uses, leading to the eventual collapse of the financial institutions in August 2017.

With regards to Capital Bank, the report claimed it used part of the liquidity support to set up another bank called Sovereign bank [which has also collapsed].

Eagle Project

Meanwhile, the Eagle Project document captures specific timelines the BoG was expected to take cleaning the mess created.

The implementation of the roadmap began on January 26, 2018.

The document among other things was supposed to help the central bank take inventory of assets of directors and shareholders of the defunct banks and also take necessary actions against them.

Check below for the Eagle Project

January 26, 2018: Meeting with Boulders Advisors Limited, Joint Receivers and Banking Supervision Department of Bank of Ghana for briefing on [Boulders] report and implementation of findings
January 29 – February 2, 2018: Identify and agree on low hanging fruits asset recovery
January 29 – February 2, 2018: Invite MC Management Services, Pronto Services and Breitling Services regarding payment of commercial paper GHS130m, GHS20m and GHS35m
January 29 – February 2, 2018: Receivers and EOCO invite Board of Capital Bank to explain Utility of Liquidity support of GHS620m and conditional payment of GHS27.5m by Board
January 29 – February 8, 2018: Inventory related business assets of Board members and related parties (Companies, realty such as Labone property, Dansoman property, oceanic Bottling Company, vehicles)
Immediately: All shareholders and ex-directors of Capital bank financial market institution for a period of undertake a written commitment of prohibition from any 5 years
Immediately: Declaration of Assets by Shareholders and Directors of Capital Bank
Immediately: Receivers / BoG to request Board of Sovereign Bank to resign
Immediately: Receiver/BoG to request shareholders of Sovereign bank to transfer all shares to Receiver
Immediately: Old Board of Sovereign Bank to request to assist recovery of investments placed with Nordea Capital
Immediately: Receivers with BoG approval, to appoint interim for two years management to manage the bank on a consulting basis
Immediately: Asset Quality Review to be immediately undertaken on Sovereign Bank to ascertain quality of Bank assets
Immediately: All shareholders and ex-directors of Sovereign undertake a written commitment of prohibition from any financial market institution for a period of 5 years
Immediately: Declaration of assets by Shareholders and Directors of Sovereign bank
Immediately: Receivers / BoG to request Board of Sovereign Bank to resign
Immediately: Receiver/BoG to request shareholders of Sovereign ban to transfer all shares to Receiver
Immediately: Old Board of Sovereign Bank to request to assist recovery of investments placed with Nordea Capital
Immediately: Receivers with BoG approval, to appoint interim management to manage the bank on a consulting basis for two years
Immediately: Asset Quality Review to be immediately undertaken on Sovereign Bank to ascertain quality of Bank assets
Immediately: All shareholders and ex-directors of Sovereign undertake a written commitment of prohibition from any financial market institution for a period of 5 years
Immediately: Declaration of assets by Shareholders and Directors of Sovereign bank
Immediately: Receivers/BoG invite shareholders and board of directors of UT Bank to address settlement of related party placements and debts GHS71.6m and US$14.3m
Immediately: All shareholders and ex-directors of UT Bank undertake a written commitment of prohibition from any financial market institution for a period of 5 years
Immediately: Declaration of Assets by Shareholders and Directors of UT Bank
Immediately: Receiver with the assistance of Bank of Ghana, Financial Intelligence Centre, Central Securities Depository and Registrar Generals’ Department assemble registered and financial assets of all shareholders and board of directors of Capital Bank and UT Bank including related family members (spouses, children and parents)
Immediately: BoG should first set up an internal financial stability committee which reviews the BoG’s internal supervision and licensing reports. It is important that BoG audits these internal reports prior to any steps being taken in coordination with other regulators. This committee should comprise internal and external members and be similar in standing to MPC. Given that BSD has internal shortcomings, it is important to introduce this external supervision. The new committee will be a committee of BoG’s board
Immediately after BoG Financial Stability Committee is set up: BoG should establish an inter-regulatory committee comprising of Securities and Exchange Commission, National Insurance Commission, Financial Intelligence Centre, Ghana Stock Exchange, National Pensions Regulatory Authority and Central Securities Depository to review findings of Eagle project report and to agree a process for strengthening the regulatory framework for the financial services industry
Immediately: Inter-regulatory committee to establish a sanction register list published quarterly to be used in screening ownership, board directorship of sanctioned persons
Immediately: Outcome of regulatory breaches identified by findings of receivers and sanction list to be referred for criminal review and prosecution
Immediately: Investigate related and connected businesses to ascertain beneficial ownership by ex-shareholders and ex-directors of Capital bank and UT bank.
Immediately: BoG should extend the Asset Quality Review by KPMG to cover 2017
Immediately: BoG to review green and brownfield licensing procedures
Immediately: BoG to ensure cash escrow of capitalization
Immediately: Developments and implementation of an industry standard Governance Code of Conduct
Immediately: Annual certifications should be required of all Directors on Financial Risk Management
Immediately: Quarterly certification by Board of Directors and key management of adequate disclosure on related and connected party transactions
Immediately: A two (2) year cooling-off period should be established for former BoG employees as consultants and acceptance of board directorships in any institution regulated by BoG
Immediately: Institute a quarterly certification of BSD key management, licensing and examiners on their dealings with any regulated financial institution
Immediately: Our recommendation is that liquidity support should be issued as a collateralized credit facility to be drawn down on need basis rather than a pool of cash availed to a bank. Every drawdown should be approved for a specific utilization by a BoG appointed advisor. This adviser should also serve on the board of the recipient bank and any drawdown must be accompanied by a note from the recipient’s auditors confirming that the recipient is a going concern as well as a memorandum which is circulated to members of the financial stability committee.

Source: CITI Newsroom

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