Rev. Fitzgerald Donkor- former CEO, Capital Bank
Adequacy issues of defunct Capital Bank were manifest from the birth the financial institution in 2013, a report has stated.
The report said shareholders of the bank failed to provide liquid top-up capital to the bank as required by the regulator.
“It’s imperative to note that the shareholders did not introduce liquid top-up capital in the bank as required per the BSD letter dated July 23, 2012 by the Head of Banking Supervision and referenced BSD/52/2012 to the Chief Executive Officer, First Capital Plus Savings and Loans.
The letter advised that though the FCP Bank Limited had been granted approval in principle (provisional approval) under Section 6 of the Banking Act, 2004 (Act 673) as amended, the “final approval and the subsequent issuance of an operating licence was subject to the fulfilment of the following pre-licensing conditions namely the submission of evidence of lodgment of additional capital funds needed to make up the required GH¢60 million.
The said funds, according to BoG, should be lodged in an escrow account which it could be verified.
“However, the sponsors engaged in a ‘capital re-engineering’ by placing the savings and loans deposited funds with the above financial institutions and then proceeded to have those placements issued in their respective names, which they used as evidence of the additional capital required to meet the Class 1 Licence.
“This action was contrary to the BoG approval requirement of lodging verifiable cash in an escrow account.”
It said First Capital Savings and Loans at the time of applying for a Class 1 licence was required to have a minimum capital of GH¢60 million.
BoG said it accepted GH¢14.3 million as income surplus of the savings and loans institution, and therefore the sponsors needed to provide additional capital of GH¢45.7 million.
The shareholders presented evidence to BoG of investment placements worth GH¢52.3 million from the following institutions: IFS – GH¢32.8 million; Alltime Capital – GH¢11.5 million and Accent Financial Service – GH¢8.0 million, which totaled GH¢52.3 million.
“There were also investment contributions from shareholders plus income surplus of GH¢10.0m and GH¢4.3 million respectively which brought total capitalization to GH¢66.6 million.”
The BoG’s BSD Risk Assessment Summary report for the period February, 2014 to January 31, 2015 (a year after operating as a Class 1 bank) stated that “the bank has been capital deficient since inception as a result of some monies (principal and interest as at 2011 was estimated at GH¢136.73 million, by a special committee of the board which investigated the issue) taken from the bank by some of the bank’s shareholders for investments in some projects to raise capital for the bank which never materialised.
The position led to the further deterioration of the bank due to increased NPLs, leading to a total loan loss provision of GH¢333.88 million.
By Samuel Boadi