There are fresh revelations by the Central Bank detailing what auditors term “willful deceit” on the part of shareholders and directors of defunct UT and Capital Banks.

A 2014 Bank of Ghana (BoG) Examination and Inspection Report by Boulders and Advisors Limited also found that there was a significant amount of inter-group lending within the two banks.

This was after a review of two forms of related party transactions; first was loans granted to individuals and companies related to the bank and loans granted to companies connected to one another by ownership and directorship but unrelated to the bank group.

The Central Bank revoked the license of two commercial banks – UT Bank and Capital Bank in August last year.

The action was triggered by the inability of the two banks to turn around their negative capital adequacy position which has lingered on for some time now.

 

BoG said the action has been taken against the affected banks due to their “terrible” financial situation and their inability to perform within the banking industry.

This has become topical following the recent closure of five struggling banks last week with BoG announcing it has created the Consolidated Bank Gh. Ltd to take.

Sovereign Bank, Royal Bank, The Beige Bank, Construction Bank and Unibank are the five financial institutions that have run into liquidity challenges.

Detailing their findings on UT and Capital Banks, the Report said, “Capital Bank was a web of transactions involving insider parties, that is, directors, shareholders and their related companies.”

 

“The initial transactions imply willful deceit at the conversion stage from a saving and loan to a full tier 1 banking license. At this stage, the shareholders appear to ‘re-engineer capital amounting to ¢56 million through a suspect placement to local financial institutions.

“On March 30, 2016, the CEO of the Capital Bank wrote to the Head of Banking Supervision requesting that a non-existent investment of ¢482.4 million, which included the ¢56 million, should be converted into five-year debt.

“The BSD in a letter dated June 3, 2016 referenced BSD/52/2016 to the Managing Director of Capital Bank that the BoG granted approval in principle for the non-existent investment of ¢482.4 million to be structured in a loan facility to be paid by the following shareholders over a period not to exceed five years: Ato Essien, Oheneba Osei Akoto, Stephen Enchill and Kingsley Atta Ghansah. This action granted by the BoG could have been avoided in 2015 when the Risk Assessment report indicated that no capital had been introduced into the bank for the Class 1 License.”

Regarding UT Bank, the report said two payments were made to the former CEO and a Director, M PK Amoabeng from a loan defaulting entity, Kofi Jobs Limited.

The loans total ¢5 million and were never disclosed to the Board of the bank.

“There was a significant amount of inter-group lending involving other subsidiaries of the holding company, UT Holdings (¢71.6 and $14.3 million),” it added.

Connected party loans were also made to:

– Ibrahim Mahama’s related Companies amounting to ¢261.4 million and $6.4 million.

– Quincy Sintim’s related companies, amounting to ¢84.1 million.

– Beige Group’s related companies amounting to ¢10.9 million.

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