Unibank owes GCB bank GHC200m

By Elorm Desewu

Unibank Ghana Limited, which has been declared technically insolvent by the statutory regulator, the Bank of Ghana, is indebted to GCB bank, the largest bank in the country in terms of assets, to the tune of GHC200 million, Economy Times has learnt.

GCB bank was used as a third party bank to borrow from BoG as a last resort for Unibank to the tune of GHC400 million, but Unibank has been able to pay only GHC200million, having an outstanding debt of GHC200 million to be settled.

However, the BoG has taken a hard line stance to debit GCB bank’s account of GHC200 million. This means that the GHC200million has now become the debt of GCB bank.

The GHC400million which was borrowed from BoG was enough to have been used to establish an entirely new bank in the country since it equivalent to the new minimum capital requirement which, instructively, most indigenous banks complain is above their financial capacity to meet.

GCB reduced the ratio of its non-performing loans from 14% in 2016 to 11% in 2017. Again, the ratio of the loan book as a proportion of its total assets declined, while increasing the proportion of its portfolio of investment in securities.

The KPMG, was expected to present its preliminary report to the statutory regulator, the bank of Ghana, (BoG) last month.

The KPMG report is being eagerly awaited by the banking public following rumours – which remain unconfirmed by official sources – that the audit firm’s investigations have uncovered major corporate governance infractions and imprudent risk management practices. However it is still uncertain whether the Bank of Ghana will authorize the report being made public since there are worries within the bank that some of the revelations may damage confidence in the banking industry as a whole.

However, a preliminary report by KPMG, the new administrators of Unibank, as appointed by the Bank of Ghana to avert its collapse due to insolvency, has revealed that Roland Agambire, the CEO of Agams Group of companies and a business mogul was indebted to the tune of GHC144 million, far exceeding the single obligor limit of the bank.

Single obligor limit is the maximum amount a bank is allowed to lend a single borrower in relation to the total shareholders' funds of that bank.

The debt has been sitting on the books of the bank for some time now, with no any effort from the debtor, who is currently domiciled in Dubai, to settle the debt.

According to KMPG, this and other debts have made the bank to be technically insolvent, at a time when it is expected to meet the new minimum capital requirement of GHC400 million by the end of December, 2018.

In exercise of its powers under Sections 107 and 108 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) the Bank of Ghana appointed KPMG as Official Administrator for UniBank Ghana Limited.

Section 107 of Act 930 empowers the Bank of Ghana to appoint an Official Administrator to take official control of a bank when its capital adequacy ratio (CAR) has fallen below 50% of the required minimum of 10% (i.e. below 5%).By the time the BoG appointed an administrator, Unibank’s CAR was negative to the tune of 24%,

Under section 108 of Act 930, the Official Administrator is authorized to exercise a variety of powers to rehabilitate and return the bank to regulatory compliance within a period of six months, at the end of which the bank will be returned to private ownership and management.

The appointment by the Bank of Ghana of the official administrator was aimed at saving UniBank from imminent collapse. It was to prevent potential losses to depositors and other creditors, and ensure that the financial condition of the bank does not create further risks for the entire financial system.

KPMG as Official Administrator has assumed control of the bank and all its branches and carries out the responsibilities of the shareholders, directors, and key management personnel of UniBank.

In line with its powers under Act 930, KPMG will ascertain the state of the bank’s assets and liabilities, and exercise a variety of powers under Act 930 to rehabilitate and return the bank to regulatory compliance and viability within a period of six months, at the end of which the bank will be returned to private ownership and management. However considering the sheer depths of Unibank’s governance problems it is likely to take longer than six months to restore the bank to good health, but the administrators are optimistic that this will be achieved sooner than later and that depositors will not lose any of their funds.

UniBank’s problems are part of the legacy issues in the financial sector attributed to weak economic growth and poor corporate governance and risk management practices.

It will be recalled that UniBank was one of nine banks identified after the asset quality review exercise undertaken in 2016, to be significantly undercapitalized with a CAR of 4.75%. As part of efforts to recapitalize the bank, it submitted capital restoration plans to the Bank of Ghana which it implemented to build up its capital to 7.7% by August 2017. Subsequent reviews of UniBank’s books by Bank of Ghana’s supervision teams showed that the bank had not reported the state of its loan book accurately.

Consequently by October 2017, its CAR was estimated at negative 12.5 %, making it technically insolvent. By December 2017, its CAR had dropped further to negative 24%.

The bank failed to submit its monthly returns to the Bank of Ghana for January and February 2018, and as a result Bank of Ghana had no evidence to suggest that its CAR had been restored to the regulatory minimum of 10%, hence the appointment of an administrator.