{"id":686424,"date":"2019-08-20T10:22:54","date_gmt":"2019-08-20T10:22:54","guid":{"rendered":" <br><div>\n\t\t\n<p><strong>Dr. Nii Kotei Dzani<\/strong><\/p>\n\n\n\n<p>IDEAL FINANCE\u2019S high non-performing loans (NPLs) ratio of 23.2% was mainly attributed to poor credit risk management which put the deposits of its customers at risk.\u00a0 <\/p>\n\n\n\n<p>A\nreport by t"},"modified":"2019-08-20T10:22:54","modified_gmt":"2019-08-20T10:22:54","slug":"ideal-finance-put-customers-savings-at-risk-bog","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2019\/08\/20\/ideal-finance-put-customers-savings-at-risk-bog\/","title":{"rendered":"Ideal Finance Put Customers Savings At Risk &#8211; BoG"},"content":{"rendered":"<p><\/p>\n<div>\n<p><strong>Dr. Nii Kotei Dzani<\/strong><\/p>\n<p>IDEAL FINANCE\u2019S high non-performing loans (NPLs) ratio of 23.2% was mainly attributed to poor credit risk management which put the deposits of its customers at risk.\u00a0 <\/p>\n<p>A<br \/>\nreport by the Bank of Ghana (BoG) which made this known said Ideal Finance,<br \/>\nwhich was part of the Ideal Group of companies belonging to Dr. Nii Kotei Dzani,<br \/>\nwho is also a member of the Council of State, has been faced with severe<br \/>\ninsolvency and liquidity challenges over the past two years. <\/p>\n<p>The<br \/>\nBoG said it found key regulatory violations such as the adjusted net worth of<br \/>\nnegative GH\u00a2117.5 million as of the end of November 2018, indicating that the<br \/>\npaid-up capital violated Section 28(1) Act 930.<\/p>\n<p>It<br \/>\nfaces a significant capital shortfall with a Capital Adequacy Ratio (CAR) of<br \/>\nnegative 33% in breach of the minimum required of 13%, with a corresponding<br \/>\ncapital deficit of negative GH\u00a2188,257,625.35.<\/p>\n<p>It<br \/>\nis also facing a severe liquidity crisis with numerous complaints received by<br \/>\nthe BoG from aggrieved customers who have been unable to access their deposits<br \/>\nwith Ideal Finance for the past several months.<\/p>\n<p><strong>Failed Minimum Capital<\/strong><\/p>\n<p>It<br \/>\nhas consistently failed to meet the minimum cash reserve requirement of 10% of<br \/>\nits total deposits. <\/p>\n<p>Ideal<br \/>\nFinance shareholders have failed to restore the bank to the required regulatory<br \/>\ncapital and liquidity levels in spite of long-standing promises that new<br \/>\ncapital was expected from foreign investors according to the report.<\/p>\n<p><strong>Adjusted Capital<\/strong><\/p>\n<p>The<br \/>\ninstitution\u2019s adjusted CAR of negative 32.8% as of the end of November 2018 is<br \/>\nin violation of Section 29(2) of Act 930.\u00a0\n<\/p>\n<p>Contrary<br \/>\nto section 64 (2) of the Banks and Specialised Deposit-Taking Institutions Act,<br \/>\n2016 (Act 930), Ideal Finance\u2019s exposure to its related party has consistently<br \/>\nbeen above the regulatory limit of 25% of net own funds (NOF). <\/p>\n<p>Exposures<br \/>\nto related parties (FirstTrust Savings &amp; Loans and Ideal Capital partners)<br \/>\nwere to the tune of GH\u00a263.19 million according to the report.<\/p>\n<p><strong>Unpublished Audited Accounts <\/strong><\/p>\n<p>\u201cThe<br \/>\ncompany is yet to publish its 2018 audited accounts contrary to section 90 (2)<br \/>\nof the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).<br \/>\nFurthermore, the company did not keep accounting records in a manner that gives<br \/>\nan accurate and reliable account of the transactions of the company, and did<br \/>\nnot therefore show a true and fair view of its operations.\u00a0 <\/p>\n<p>\u201cIdeal<br \/>\nFinance has not submitted their returns since November 2018. All efforts to get<br \/>\nthem to submit have proven futile. An \u2018onsite\u2019 examination carried out in<br \/>\nSeptember 2017 revealed the institution did not appropriately classify fifteen<br \/>\n(15) impaired loan accounts in accordance with the requirements of the Bank of<br \/>\nGhana\u2019s Guide for Reporting Institutions, which resulted in an additional loan<br \/>\nloss provision of GH\u00a214,255,275.53.\u201d <\/p>\n<p><strong>Over-Exposure<\/strong><\/p>\n<p>\u201cThe<br \/>\ninstitution was technically over-exposed to all its credit customers due to its<br \/>\nnegative net own funds position which is in violation of Section 62(1) of Act 930.<br \/>\n3. Credit facilities granted to the affiliates of the company were not approved<br \/>\nby the board and the exposures were not reported to Bank of Ghana in breach of<br \/>\nSection 70(2) and 70(4) of Act 930. Total related party loans totalled GH\u00a252.70<br \/>\nmillion.\u201d<\/p>\n<p><strong>Merger<\/strong><\/p>\n<p>In<br \/>\na letter dated 25th June 2019, the BoG said it was notified of the intention to<br \/>\nmerge the operations of Ideal Finance Limited (IFL) and FirsTrust Savings and<br \/>\nLoans Limited (FTSL).<\/p>\n<p>A<br \/>\nreview of the documents submitted in connection with the proposed merger and<br \/>\nall available records obtained from the two institutions revealed that the<br \/>\nshareholders\u2019 funds of Ideal Finance Limited (IFL) and FirsTrust Savings and<br \/>\nLoans Limited (FTSL) as of March 2019 per the merger documents was negative<br \/>\nGH\u00a262.18 million and negative GH\u00a293.22 million respectively.<\/p>\n<p>The<br \/>\nreported shareholders\u2019 funds of IFL per the last submitted prudential returns<br \/>\nas of November 2018 were GH\u00a228.89 million.<\/p>\n<p>This<br \/>\nwas adjusted to negative GH\u00a2117.50 million due to additional loan loss<br \/>\nprovisions and impaired investments, resulting in a decline in the reported CAR<br \/>\nof 0.52% to negative 52.18%, indicating a capital deficit of GH\u00a2171.92 million.<\/p>\n<p><strong>Shareholders\u2019 Funds<\/strong><\/p>\n<p>Also,<br \/>\nthe reported shareholders\u2019 funds of FTSL per the prudential returns for May<br \/>\n2019 of negative GH\u00a299.46 million was adjusted to negative GH\u00a2174.10 million<br \/>\ndue to impaired investments, resulting in a further reduction in the CAR of<br \/>\nnegative 48.67% to negative 132.96%, indicating a capital deficit of GH\u00a2189.13<br \/>\nmillion. <\/p>\n<p>The<br \/>\nCAR of the merged entity was, therefore, assessed to be negative 78.32%, with a<br \/>\ncapital deficit of GH\u00a2361.05 million. BoG could not accede to the request to<br \/>\nmerge the operations of FirsTrust Savings and Loans Limited and Ideal Finance<br \/>\nLimited. <\/p>\n<p>The cash reserve ratios of FTSL as of May 2019 was 0.07% compared to the regulatory minimum of 10%. Both institutions are unable to meet customer withdrawal needs and the BoG has received countless complaints from customers of both institutions about their inability to access their funds. The use of landed property to shore up capital for the emerging entity is considered unacceptable in the light of the insolvent and illiquid state of the two institutions.<\/p>\n<p><strong>By Samuel Boadi<\/strong><\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Dr. Nii Kotei Dzani IDEAL FINANCE\u2019S high non-performing loans (NPLs) ratio of 23.2% was mainly attributed to poor credit risk management which put the deposits of its customers at risk.\u00a0 A report by the Bank of Ghana (BoG) which made this known said Ideal Finance, which was part of the Ideal Group of companies belonging [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":686425,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-686424","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.8 - 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