First Allied Presented Deceptive Reports

Nana Yaw Oduro, chairman, First Allied

A REVIEW of the
operations of First Allied Savings and Loans (FASL) Limited in July 2018
revealed that its reported financial statements did not reflect its true state
of affairs, the Bank of Ghana (BoG) has stated.

The Central Bank
said FASL made an adjustment to its financials resulting in an assessed
negative capital adequacy ratio (CAR) and negative net worth mainly due to huge
accumulated losses recorded over the years, additional provision for loan
losses and reversal of unearned interest receivables from income.

The BoG report
stated: “The institution’s net worth of negative GH¢661.84 million as of end
May 2019 indicates that its paid-up capital is impaired in violation of Section
28(1) Act 930. First Allied’s capital adequacy ratio of negative 263.21% as of
end May 2019 was in violation of Section 29(2) of Act 930.

“The income
surplus and profit & loss accounts per the General Ledger as of 31st August
2018 showed losses but the institution reported positive Income Surplus and
Profit and Loss figures in the prudential returns as of 30th June 2018
submitted to the Bank of Ghana.”

Understated Deposit Liabilities

“The reported
deposit liabilities were grossly understated as of end-June 2018, in effect,
reducing customer deposits to conceal losses over the years.

“Furthermore, total
non-performing loans constituted 88.89% of First Allied’s total loan portfolio
while also the current accounts of eight (8) related companies linked to the
major shareholder were overdrawn in excess of GH¢100  million and were non-performing,” the dossier

Wrong advances

Additionally, the
report said FASL purportedly advanced credit facilities to various
institutions, predominantly churches and schools without proper documentation. “These
facilities are non-performing.”

The report said
FASL stopped submitting prudential returns to BoG in June 2018, citing
technical challenges.

Inability to meet deposit withdrawals

“The institution
cannot meet the deposit withdrawals of its customers with many customer
complaints received by the Bank of Ghana. First Allied Savings & Loans Ltd.
(FASL) was found to be insolvent with a negative CAR and a negative net worth
as of 31 March 2018.

Capital deficiency

The BoG directed
the board chairman/majority shareholder and management of the institution to
immediately inject additional capital to address the capital deficiency.

In June 2018, BoG
said it received reports of a run on FASL due to its inability to meet
customers’ deposit withdrawals, especially at its Kumasi and Adabraka branches.

“The liquidity
challenges later spread to all the twenty-seven (27) branches of the
institution across the country. The shareholders have failed to address these
liquidity challenges,” it added.

First Allied was licensed by BoG to operate as a savings and loans company on March 27, 1996.

BY Samuel Boadi