UniBank safe for business as deposits and staff jobs remain intact – BoG

Business News of Wednesday, 21 March 2018

Source: thebftonline.com

2018-03-21

File photo – UniBank office

Second Deputy Governor of the Bank of Ghana, Elsie Awadzi has reassured customers of indigenous bank UniBank that, their deposits remain safe as KPMG takeover the assets and management of the bank.

According to Mrs. Awadzi, customers must not rush to redraw their deposits, as with the exception of management change, all other operations remain same with all funds intact.

The deputy governors call comes after the new managers of UniBank, KPMG announced that the operations of the bank shall resume on Wednesday, March 21, 2018 at 12noon.

Current development with regards to UniBank, seem to have got customers to become apprehensive as the banks ATM’s and branches have been closed to business this morning to allow KPMG to conduct a quick audit to ascertain the real situation with regards to funding and other operations.

Speaking to the Media, the Second Deputy Governor of the Bank of Ghana, Elsie Awadzi asked customers to remain calm as their deposits remain safe, and that they can continue to do business at any of its branches.

“We will urge all customers to be calm as their deposits are safe. The ATMs was closed due to some work of checking on all deposits by the new managers KPMG. But I will say that the bank is safe and all deposits are also safe and all jobs of the workers are also safe as the bank will continue with its business today.”

Mrs. Awadzi, therefore, urged customers not to panic and rush to their branches to redraw their funds which will put them at risk of being robbed or it being stolen.

“Let me say this to customers of UniBank, don’t go and redraw your money and run the risk of losing it because UniBank are, and will remain safe and that they can continue to do business at any of its branches,” she added.

The BoG boss also further stated that, KPMG as Official Administrator will only play the role of assuming control of the bank and all its branches and carry out the responsibilities of the shareholders, directors, and key management personnel of UniBank.

According to her, during the period of official administration of UniBank, the bank will remain open for business under the management and control of KPMG overseen by the Bank of Ghana and is not being closed and liquidated.

On the faith of the workers of the Bank, She stated that, since the bank is not being liquidated, all jobs are intact with the exception of that of the top management who have been asked to step aside and handover to KPMG, who will manage it till UniBank’s fortunes turns back to the path of profitability.

BOG seizes the administration of UniBank

Bank of Ghana has announced that, UniBank Ghana Limited (UniBank) has been placed under administration aimed at saving the bank from imminent collapse.

In a press conference addressed by the Governor of the Bank of Ghana, Dr. Ernest Kwamina Yedu Addison said, the Central bank 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 has, effective today 20th March 2018, appointed KPMG as Official Administrator for UniBank Ghana Limited (UniBank).

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%).”

Mr. Addison commenting on whether or not UniBank will be returned to its owners said, 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.

Again, the appointment of the administrator, according to the BOG, will 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.

Reasons for KPMG administering of UniBank

KPMG’s appointment as official administrators of UniBank according to the Bank of Ghana is to save uniBank from collapse.

And this is as a result of the fact that uniBank has, among other things:

The appointment of the Official Administrator has therefore become necessary due to the fact that uniBank has, among other things:

Persistently maintained a capital adequacy ratio (CAR) below zero (currently negative 24%), making it technically insolvent. This contravenes section 29 of Act 930 which requires a minimum CAR of 10% to be maintained at all times.

Persistently suffered liquidity shortfalls and consistently breached its cash reserve requirement. As a result, UniBank has relied extensively on liquidity support (over GHS 2.2 billion) from the Bank of Ghana over the past two years to meet its recurring liabilities. Among other things, a key shareholder of the bank managed to obtain liquidity support from the Bank of Ghana using third party banks as its agents. The Bank of Ghana’s exposure to the bank was therefore underestimated by nearly GHS 400 million, as this amount was not reflected in its books.

Conducted its credit administration in a manner that has jeopardized the interests of depositors and the financial sector as a whole.

Failed to comply with a directive of the Bank of Ghana dated 26th October, 2017 under section 105 of Act 930, prohibiting the bank from granting new loans and incurring new capital expenditures.

Failed to comply with several other regulatory requirements, including:

Lending to a number of borrowers in excess of its regulatory lending limit (single obligor limit) under section 62 of the Banks and SDIs Act, 2016 (Act 930);

Borrowing from the inter-bank market without the written approval of the Bank of Ghana when its CAR was less than the prescribed ten percent (10%), in breach of section 66(1) of Act 930.

Outsourcing a number of services such as those of tellers, receptionists, and security, to affiliate companies without the prior approval by the Bank of Ghana, contrary to section 60 (12) of Act 930.

Refusing to cooperate with the Bank of Ghana in the performance of its supervisory responsibilities, including deliberately concealing some liabilities from its balance sheet, and failing to submit documents and records for supervisory inspection.

Poor corporate governance and risk management practices which rendered the bank vulnerable to macroeconomic shocks.

Generally conducting its affairs in a manner detrimental to the interests of depositors and the financial system as a whole.

In spite of the Ministry of Finance recently agreeing to absorb a significant amount of the debts of Government contractors owed to the bank to the tune of ¢428,817,961 (backed by Interim Payment Certificates issued to contractors), the bank has not been able to address its capital deficiency, which has continued to deteriorate.

Also, the bank engaged in significant transactions with its parent company and affiliate companies including connected lending and other related party transactions without sufficient controls as required by law.

Allowing the continuation of UniBank’s activities in their current form would be detrimental to the interests of depositors and the banking system as a whole.

Several attempts by the Bank of Ghana to work together with management and shareholders of the bank to address the capital deficiency and liquidity challenges have failed to achieve the desired outcome, making the continuous reliance on Bank of Ghana for liquidity support unsustainable.

More recently, the bank’s announcement of a purported pledge of ADB Bank shares in its favour by its shareholders to secure commitments for recapitalization, were deemed by the Bank of Ghana to be null and void as no prior approval had been obtained from the Bank of Ghana as required by Act 930 for acquiring significant shares in a bank or exercising other forms of control by virtue of any transaction.

In any event, a request by the Bank of Ghana to the bank to submit copies of the Deed of Pledge and underlying transactional documents were not heeded by uniBank, its shareholders, directors, or management.

Furthermore, there are additional regulatory hurdles outside the control of the Bank of Ghana required to be cleared by UniBank before potentially realizing any value, if at all, from the said transaction, making it incapable of addressing the immediate capital and liquidity needs of the bank.

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