Dr Ernest Addison – Governor BoG
The Central Bank has indicated that there are no more banks currently in distress in Ghana that could occasion the revocation of their licences.
It said funds of the seven remaining banks, which hitherto were found to be in distress, are now safe.
Dr Ernest Addison, Governor of the Bank of Ghana (BoG), addressing the media on Monday over the takeover, gave assurance that there was no need for panic over further revocation of licences.
“Ladies and Gentlemen, you will recall that after the AQR [Asset Quality Review] exercise, a number of banks were not compliant with the capital adequacy ratio. I am happy to report that most of these banks have put in place credible action plans to restore the capital deficiency, and majority of these banks are already compliant as at today, and the overall banking system remains solid and well capitalized.”
Worry
The collapse of the two banks has caused fear and panic as to whether similar institutions that grew along their paths to universal banking status could suffer the same fate.
Many also believe their migration from savings and loans entities to full banks have not been managed properly, hence the collapse of UT and Capital Bank.
Dr. Addison told the media that once a micro finance company attained a certain status which gave it sufficient funds, it became compelled to upgrade itself into a bank.
That, he said, was because there was a cap on what a financial entity could hold as deposit and also offer as loan and so, once a micro finance firm had grown in size and had enough cash at its disposal, it became necessary for it to upgrade to be able to make additional investment with the funds it had.
UT Bank Limited and Capital Bank Limited both started their businesses as savings and loans companies after which they transitioned into fully-fledged commercial banks before their licences were revoked on August 14 because of insolvency.
“UT Bank and Capital Bank were heavily deficient in capital and liquidity and their continuous operation could have jeopardized not only their depositors’ funds, but also posed a threat to the stability of the financial system.”
Background
UT Bank, founded in 1997 as Unique Trust Financial Services – a non-bank financial services provider, until its collapse was one of Ghana’s most celebrated brands, after it evolved from a micro-finance company into a successful bank some years ago.
Capital Bank also grew from a micro finance company to a full bank after it was founded in 2009, winning several industry awards along its growth path.
It received provisional universal banking licence in July 2012 and after six-month provisional period, it was awarded full licence on 4th December 2013.
It became officially known as First Capital Plus Bank and rebranded to Capital Bank in 2015.
By Melvin Tarlue