It has now emerged that a former Chief Executive Officer (CEO) of Capital Bank gave more-than-enough signals to the board in 2014 that the bank was headed towards insolvency but it ignored the warning resulting in its collapse.
John Kofi Mensah, who is now Managing Director of Agriculture Development Bank (adb), wrote a memo to the board, dated August 11, 2014, titled: “Urgent Action To Salvage The Reputation And Fortunes Of First Capital Plus Bank,” reiterating his earlier concerns and request for the Board to act with expedition and take drastic, as well as, urgent steps to resolve the seemingly intractable problems that had bedevilled and continued to dog the growth of the then First Capital Plus Bank.
Indifference
“We have discussed these issues at length, but we do not seem to have made any significant progress as exemplified by the fact, among others, that a recent 3-man committee we set up to come up with some solutions appears to have been still born. We also appear to be perfecting the art of crafting long-winding resolutions, which are not backed by any serious follow-up action.
“I perceive that we are very conversant with and know very well the problems that confront, but lack the critical boldness and courage to tackle the bull by the horns. With respect, we all appear to be guilty of fiddling while Rome burns.”
Government directive
He continued: “….The clarion call has assumed some urgency due in part to the attempt by the Government/Bank of Ghana to pass into law the Depositors Protection Bill and the Deposit Taking Institutions Bill, which would, among others, oblige every Director of a Bank to report to the Bank of Ghana if he has reason to believe that a Bank of which he is a director cannot meet its future obligations on the pain of criminal sanctions.
“In short, transparency, candour and diligence in prosecuting a bank’s object of an incorporation is no longer a matter of personal ethics, but have been raised to an obligatory statutory duty with sanctions to boot. We can therefore not have the luxury of going on with our duties as ‘business-as usual.”
Rejection by Deutsche Bank
He called for urgent action on the bank’s inability to establish offshore counterparty relationships due to issues with shareholder’s credibility.
“As we are all undoubtedly aware, this problem has arisen and persists as a direct consequence of outstanding and unresolved issues hovering around shareholders of the bank. The Deutsche Bank and others have, after conducting due diligence on the bank, rejected our request for business relationship with them. We all know and agree that this type of business relationship constitute one of the essential life lines for the bank.
“Also long as this problem persists, we cannot reasonably expect to grow outside the boundaries of this country. This will undoubtedly lead to stunted growth and spell doom for the bank in the long run. Unfortunately as the issue is, I am sorry to state that we have dithered for far too long on this matter and require to act forthwith.”
The last straw
Mr Mensah also raised the unresolved third party fund (TPF) and capitalization issues, saying that was a long-standing issue that needed no further clarification.
He also mentioned the increasing interest expense and general costs of doing business which had “been the bane of the bank for some time now, that while management is embarking on a desperate and aggressive deposit mobilization to shore up liquidity to cover holes in the balance sheet, it is resulting in increased interest expense and general costs to us. This is detrimental to our profitability drive and the same is unsustainable.”