The letter on the front page of our newspaper today is the result of “Diagnostic Studies into the Valuation of Loans and Investments of Banks in Ghana” as the heading suggests. It was an exercise undertaken by the Banking Supervision Department of the Bank of Ghana where specific reports were issued in relation to the performance of each Universal Bank in the country.
According to the letter dated – 9th March, 2016 the Central Bank undertook the “special exercise to assess the quality of the financial exposures in the form of loans and advances as well as investments in the banking system as at 31st May, 2015 and later updated to 31st October, 2015. Auditing Firm, Ernst & Young, was engaged to undertake the assignment in your bank.”
Our checks at the BoG confirm that at the end of the exercise, some banks, including GN Bank, were given clean financial health bill to continue with their operations in the banking and the financial sectors of the country.
In the case of GN Bank, the letter stated explicitly: “At the end of the exercise your bank was assessed to hold adequate provision to your financial exposures. You are advised however to continue monitoring of your loans and investments portfolios to ensure that the quality does not deteriorate and to book appropriate provision when necessary.”
The result of the BoG study confirm what GN Bank shareholders have maintained all along, that extraordinary circumstances, engineered by others, led to the closure of the bank, with the largest footprint in Ghana. Officials of the bank have told of the fact that GN Bank was one of the most liquid banks in the country due to innovative products and a solid national retail network.
What is intriguing is that while GN Bank was adjudged to be in good shape, a number of other banks were considered unsafe, their foundation shaky due to huge bad loan burdens and inadequate provisioning. Strangely enough a number of these banks are still operating as “well run” banks while GN Bank’s license has been revoked by the BoG.
Many financial watchers who were/are privy to the assessment are asking what might have gone wrong with many of these Ghanaian banks to the extent that within a two-year period, their situation may deteriorate to the extent of losing their operating licenses.
In the case of GN Bank, the question is: what happened after 2016? What destroyed GN Bank? These experts point to the freezing of government infrastructure projects, the halting of payments for certified projects. This made loans to government contractors go bad, and as default rates rose, the liquidity situation of not only GN Bank but other financial institutions suffered.
Others operating within the private sector are taking advantage of the situation and refusing to pay their loans to GN Bank and others. Some of the projects include public roads, market, GETFund projects and many others. Notwithstanding the fact that some of the contractors raised certificates of completion, government insisted on re-evaluating how the contracts were awarded these contractors. And that exercise took more than two years to complete.
There is also this expressed opinion among financial experts that the new capital requirement introduced after regime change affected the healthy financial base of these banks. The unprecedented huge jump in the minimum capital requirement coupled with the collapsing of Capital Bank and UT Bank started a run on banks which escalated with the bloodbath in August 2018 when other Ghanaian owned banks were collapsed. The panic withdrawal that ensued, without any intervention from the BoG or the government, worked to the disadvantage of GN Bank.
Our investigations continue. Part Two is under construction.
Story: Richmond DUKE KEELSON, MANAGING EDITOR