Dr Kwabena Duffuor II
Unibank’s shareholders and related parties have admitted acquiring several real estate property in their names using funds they took from the bank but not captured in the books.
According to Bank of Ghana (BoG), the directors of the banks also caused fatal damage to the bank by doling out huge loans to their cronies without recourse to the laid-down procedures.
The BoG explained that shareholders, related and connected parties enjoyed loans amounting to over GH¢5.3 billion.
The loans, which were given without collateral, attracted no interest income.
uniBank also registered a capital deficit of GH¢7.4 billion compared to the regulatory minimum of GH¢400 million, KPMG, the Official Administrator found.
Details
Giving a breakdown of this, Dr Ernest Addison, BoG Governor said shareholders, related and connected parties took amounts totaling GH¢3.7 billion which were neither granted through the normal credit delivery process nor reported as part of the bank’s loan portfolio.
Also, he said amounts totaling GH¢1.6 billion were granted to shareholders, related and connected parties in the form of loans and advances without due process and in breach of relevant provisions of Act 930.
“Altogether, shareholders, related and connected parties of uniBank had taken out an amount of GH¢5.3 billion from the bank, constituting 75 percent of its total assets,” he added.
Default
Promises by the shareholders and related parties to refund monies by mid-July 2018 and legally transfer title to assets acquired back to uniBank failed to materialize.
Dr Addison said the bank was insolvent and had no prospect of rehabilitation, adding that it had no credible path to viability, hence the revocation of its banking licence.
Non-Performing loans
Also, a significant portion of the uniBank’s loan books which formed the largest component of the bank’s assets was non-performing, he said, adding that the earning capacity of the bank continued to deteriorate.
He further disclosed:“In addition, the bank’s governance and internal control environments have been assessed as weak, with significant deficiencies in credit underwriting and loan approval process, compliance and reporting.
Key findings from KPMG’s reports indicated serious corporate governance, risk management, compliance and management flaws, as well as unlawful transactions involving shareholders, related parties and connected parties.”
Under Declaration
Out of total customer deposits of GH¢4.3 billion, uniBank failed to disclose GH¢2.3 billion to the Bank of Ghana.
Loans and advances to customers were also overstated by GH¢1.3 billion in prudential returns to the Bank of Ghana.
Over 89% of uniBank’s loans and advances book of GH¢3.74 billion as of 31st May 2018 was classified as non-performing in addition to amounts totaling GH¢3.7 billion given out to shareholders and related parties which were not reported as part of the bank’s loan portfolio.
Insolvency
Additionally, after making allowances for impairments to recognise the deterioration in the quality of uniBank’s assets and other requirements under Bank of Ghana’s capital adequacy framework, uniBank was balance-sheet insolvent with negative shareholders’ funds of GH¢6.78 billion as of 31 May 2018, representing assets of GH¢ 2.38 billion less liabilities of GH¢9.15 billion.
Dr Ernest Addison further noted: “After making adjustments to uniBank’s balance sheet to offset outstanding debts, totaling GH¢ 428,817,961 owed it by government contractors (backed by Interim Payment Certificates issued by the Government), the bank’s liabilities (including an amount of GH¢ 3.04 billion owed to the Bank of Ghana) remain significantly more than its assets, and was therefore insolvent.
“To summarise, as of 31st May 2018, uniBank was insolvent, with a capital deficit of GH¢7.4 billion (compared to the regulatory minimum of GH¢ 400 million), and a capital adequacy ratio (CAR) of negative 74.65% (compared to the regulatory minimum of 10%).
“uniBank is also cash-flow insolvent, given that a significant portion of its assets are locked up in interest-free loans and other advances to its shareholders and related parties. As a result of the financial condition of the bank, it has continued to survive largely on liquidity support to meet maturing liabilities, including operating expenses. As of June 2018, total liquidity support that has been provided to uniBank was GH¢3.1 billion, including approximately GH¢927.2 million provided since the appointment of KPMG in March 2018,”he stated.
Not Sustainable
KPMG estimated that uniBank would need additional liquidity support estimated at GH¢3.0 billion through the end of 2018 to help meet overdue and maturing obligations and operating expenses.
“Further reliance on liquidity support at this stage is unsustainable, and the bank’s continued inability to honour outstanding obligations to depositors, including financial institutions, public sector institutions, and others, continues to fuel liquidity pressures in the financial system.”
Takeover
On 20th March, this year, the Central Bank appointed KPMG as Official Administrator (OA) for uniBank to help ascertain the true financial condition of the bank, protect depositors’ funds held by the bank, and explore how the bank could be returned to viability within a period of no later than six months.
In line with the requirements of Act 930, KPMG submitted an Inventory of Assets and Liabilities of uniBank Ghana Limited on 20th April 2018 (30-day report), and a report on the Financial Conditions and Future Prospects of uniBank Ghana Limited on 20th June 2018 (90-day report).
According to BoG, KPMG’s reports confirmed, based on a detailed review and validation of the financial condition of uniBank that the bank balance sheet was insolvent at the time of their appointment as official administrator and remained so.
He explained further:“As official administrator, KPMG made efforts to ascertain the assets and liabilities of the bank and evaluated options for turning around the bank’s fortunes. KPMG, however, found that the bank’s operations are not sustainable. Among other things, the bank’s interest income and other sources of income are insufficient to cover the associated cost of funds of underlying borrowings and liabilities, as well as overheads of about GH¢0.31 billion per annum”.
By Samuel Boadi