Dr. Ernest Addison
The Bank of Ghana (BoG) has justified the decision to revoke the license of GN Bank in 2019, citing breaches of regulatory protocols as the primary reason behind the regulatory intervention.
Emphasising the institution’s failure to adhere to essential financial regulations and banking standards crucial for operational viability, the Central Bank defended its stringent stance on upholding systemic integrity over reinstating GN Bank’s license upon demand from its management.
The BoG cited an incident where the management of the defunct bank transferred $62 million customers’ deposits to support related company in the United States, leading to over exposure of the bank.
The Central Bank maintains that GN Bank failed to comply with critical financial regulations and banking standards which threatened its operational stability and thus, it cannot restore the license of GN Bank as demanded by its management. The BoG says GN Bank has no case in view of the serious breaches committed by the bank.Drawing upon the release issued by the Central Bank in August 2019 outlining the justifications for the revocation, BoG underscored how GN Bank failed to meet essential benchmarks encompassing capital adequacy, liquidity resilience, governance structures, and comprehensive risk management prerequisites expected from a banking entity of its magnitude.
Another concern was the continuous under-performance of GN Bank in maintaining requisite capital thresholds, raising doubts regarding its ability to absorb losses and ensure depositors’ interests were safeguarded.
Compounding this issue, the bank grappled with inadequate liquidity management practices, which hampered its capacity to promptly address customer withdrawal demands, consequently jeopardising depositor confidence.
Deficiencies in GN Bank’s adherence to governance standards and risk mitigation strategies were also brought to the forefront, illuminating systemic inefficiencies and exacerbating the institution’s susceptibility to heightened risks.
Particularly mentioned was the unapproved suspension of operations across 70 branches, including the head office branch at Asylum Down and Castle Road branch, coupled with the unsanctioned temporary halt of the entire management cadre – actions performed in contravention of statutory mandates outlined in the Banks and Specialised Deposit-Taking Institutions Act.
BoG explained that the license revocation was an imperative step aimed at preserving the robustness of the financial framework and shielding depositors from potential fallout attributed to GN Bank’s compromised operational health.Through its supervisory oversight, the Central Bank discerned irreparable gaps within GN Bank’s structural integrity, buttressed by profound insolvency markers and liquidity precarity, signaling an irreconcilable state void of remedial salvaging efforts.
The BoG also indicated that it uncovered sustained transgressions by GN Bank involving unwarranted extensions of credit facilities to related entities within the Groupe Nduom network of companies, fostering a culture of imprudent lending practices that betrayed fiduciary duties owed to both shareholders and customers.The fund allocations among affiliated parties, the BoG said, further exacerbated GN Bank’s capital distress and liquidity quandaries, ultimately sealing its fate as an insolvent institution.
By Vincent Kubi