BoG against UT Bank’s suspension from stock exchange
The Bank of Ghana (BoG) used its position as a regulator of the banking sector to prevail upon the Securities and Exchange Commission (SEC) and the Ghana Stock Exchange (GSE) not to suspend the erstwhile UT Bank from the exchange prior to the revocation of its licence on August 14 this year, the Graphic Business is reliably informed.
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BoG’s urge for moderation between October 2015 and August 12 this year was in spite of UT Bank’s inability to comply with capital market regulations, including the non-submission and disclosure of material information as required of listed companies.
The Graphic Business understands that the decision neither to suspend nor delist UT Bank was reached after the central bank realised that the bank required special attention to reverse its financial misfortunes and get back on its feet.
Given that delisting the bank would have exposed its woes to the investor and banking public, resulting in a possible fright, sources said in confidence that the three stakeholders agreed not to suspend the bank to allow for a remedial process aimed at reviving it.
That remedial process was overseen by the BoG, one of the sources said, citing the liquidity support that the central bank extended to the UT and Capital banks.
“Actually, it (not suspending UT Bank) was part of the collaboration to help resolve the issues,” the source, who is familiar with the discussions and subsequent decision, said.
“It is a normal practice that if the primary regulator is doing something that requires certain things, like the suspension that the stock exchange would have carried out, should not be done, then the GSE will not do that.
“They normally agreed that the sanctions should be withheld so that it does not erode those things that the primary regulator is working on with the regulator,” one of the sources added.
It is, however, not clear how long the decision not to suspend the bank would last.
SEC is yet to reply to questions sent to it on the matter.
One-week suspension
UT Bank, which was listed on the GSE in November 2008, was permanently delisted by the exchange on August 14, moments after the BoG revoked the bank’s licence and subsequently approved a purchase and assumption (P&A) agreement with GCB Bank to inherit some of its assets and liabilities.
Prior to the delisting, the GSE suspended the listing status of the bank on January 3 this year “due to the non-submission of financial reports to the market”.
The suspension was, however, reversed on January 9, making it possible for UT Bank to resume trading on the exchange.
Prior to the resumption of trading, the bank issued a statement explaining that the deferral in the publication of its financials was its complete “restructuring of the business, which will have a material impact on the presentation of the financial statements”.
Although it pledged to complete the restructuring to allow it publish its results in the first quarter of 2017, the financials were never published until it was taken over by GCB Bank this month.
SEC unfair to shareholders
Beyond being a violation of parts VI and VII of the GSE Listing Rules, the Head of Research at FirstBanC Financial Services, Mr Benjamin Amoah-Adjei, said the decision not to suspend UT Bank meant that SEC failed to seek the welfare of investors and shareholders of the bank.
“BoG was acting to protect the interest of depositors and lenders but what was SEC also doing to protect investors and shareholders?” he asked, explaining that the commission’s decision was not fair to the investing public.
“If BoG impresses on you not to suspend the bank, it is because they are protecting depositors against the impact of a bank run (panic withdrawal) but that does not serve the interest of shareholders, especially the minority ones,” he said.
He said the resort to losses as basis for not publishing the bank’s financials was untenable, given that some listed companies in that fate had often published their quarterly results.
“Someone may say that banks are unique entities because of the impact they can have on the financial system but that argument falls when you look at HFC Bank’s situation.
“They have made losses for two years in a row, their income surplus went into the negative and they are still trying to recover but they publish their results,” he said.
