uniBank was beyond rehabilitation - BoG

BY: Enoch Darfah Frimpong
Dr Kwabena Duffour, was a shareholder of uniBank Ghana Limited
Dr Kwabena Duffour, was a shareholder of uniBank Ghana Limited

The Bank of Ghana (BoG) has explained that an Asset Quality Review (AQR) of uniBank Ghana Limited revealed some unscrupulous activities of the shareholders.

According the BoG, shareholders, related and connected parties had taken amounts totaling GH¢3.7 billion which were neither granted through the normal credit delivery process nor reported as part of the bank’s loan portfolio.

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In addition, amounts totaling GH¢1.6 billion had been granted to shareholders, related and connected parties in the form of loans and advances without due process and in breach of relevant provisions of Act 930.

Related: We’ll recapitalise uniBank — Shareholders

The BoG in the press statement explaining the revocation of the license of uniBank said the bank was identified during the AQR update in 2016 exercise to be significantly undercapitalized.


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The BoG explained that even though uniBank submitted a capital restoration plan, the plan however, yielded no success in returning the bank to solvency and compliance with prudential requirements.

It added that the Official Administrator appointed for uniBank in March 2018 also found that the bank was beyond rehabilitation.

Read also: BoG collapses 5 banks into Consolidated Bank Ghana Ltd

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The BoG said efforts by these banks to extricate themselves from financial difficulty have not borne fruit. The situation has rather worsened for these banks.

Below is what the BoG said about unibank and Royal Bank

• uniBank had given out amounts totaling GH¢1.6 billion to shareholders and related parties in the form of loans and advances without due process and in breach of relevant provisions of Act 930.

In addition, these shareholders and related parties had also been given amounts totaling GH¢3.7 billion which were neither granted through the normal credit delivery process nor reported as part of the bank’s loan portfolio.

They were also not secured with collateral, and attracted no interest income for uniBank. Altogether, shareholders and related parties of uniBank had taken out an amount of GH¢5.3 billion, constituting 75 percent of total assets of the bank;

• Out of total customer deposits of GH¢4.3 billion, GH¢2.3 billion was not disclosed to the Bank of Ghana. Loans and advances to customers were also overstated by GH¢1.3 billion in prudential returns to the Bank of Ghana;

• Over 89% of uniBank’s loans and advances book of GH¢3.74 billion as of 31st May 2018 was classified as non-performing, in addition to amounts totaling GH¢3.7 billion given out to shareholders and related parties which were not reported as part of the bank’s loan portfolio;

• After making allowances for impairments to recognise the deterioration in the quality of uniBank’s assets and other requirements under Bank of Ghana’s capital adequacy framework, uniBank was balance sheet insolvent with negative shareholders’ funds of GH¢6.78 billion as at 31 May 2018 (representing assets of GH¢ 2.38 billion less liabilities of GH¢9.15 billion);

• The bank therefore has a capital deficit of GH¢7.4 billion, compared to the regulatory minimum of GH¢ 400 million;

• After making adjustments to uniBank’s balance sheet to offset outstanding debts totaling GH¢ 428,817,961 owed it by Government contractors (backed by Interim

Payment Certificates issued by the Government), the bank’s liabilities (including an amount of GH¢ 3.04 billion owed to the Bank of Ghana) remain significantly more than its assets, and is therefore insolvent

To summarise, as of 31st May 2018, uniBank was insolvent, with a capital deficit of GH¢7.4 billion (compared to the regulatory minimum of GH¢ 400 million), and a capital adequacy ratio (CAR) of negative 74.65% (compared to the regulatory minimum of 10%).

uniBank is also cash-flow insolvent, given that a significant portion of the its assets are locked up in interest-free loans and other advances to its shareholders and related parties.

As a result of the financial condition of the bank, it has continued to survive largely on liquidity support to meet maturing liabilities including operating expenses. As of June 2018, total liquidity support that has been provided to uniBank was GH3.1 billion, including approximately GH¢ 927.2 million provided since the appointment of KPMG in March 2018. KPMG estimates that uniBank will need additional liquidity support estimated at GH¢3.0 billion through the end of 2018 to help meet overdue and maturing obligations and operating expenses.

Further reliance on liquidity support at this stage is unsustainable, and the bank’s continued inability to honour outstanding obligations to depositors including financial institutions, public sector institutions, and others, continues to fuel liquidity pressures in the financial system.

uniBank’s shareholders and related parties have admitted to acquiring several real estate properties in their own names using the funds they took from the bank under questionable circumstances. Promises by these shareholders and related parties to refund monies by mid-July 2018 and legally transfer title to assets acquired back to uniBank have failed to materialize.

Based on the Bank of Ghana’s review of KPMG’s assessment of the financial condition of uniBank, the Bank of Ghana has concluded that uniBank is insolvent and has no reasonable prospect of rehabilitation, or a reasonably credible path to viability.

In arriving at this conclusion, the Bank of Ghana has carefully considered the options provided under Act 930 to rehabilitate a bank under official administration. The Bank of Ghana finds that, in the interest of promoting financial stability, protecting the interests of depositors and lenders, minimising the costs to the tax payer, and restoring integrity in the financial sector, the only reasonable option is to fully resolve the bank by revoking its banking licence and winding down its affairs through a receiver appointed by the Bank of Ghana.

The Royal Bank (Royal)

In the case of Royal Bank, an on-site examination conducted by the Bank of Ghana in 31st March, 2018 revealed a number of irregularities.

Its non-performing loans constitute 78.9 percent of total loans granted, owing to poor credit risk and liquidity risk management controls.

A number of the bank’s transactions totaling GH¢161.92 million were entered into with shareholders, related and connected parties, structured to circumvent single obligor limits, conceal related party exposure limits, and overstate the capital position of the bank for the purpose of complying with the capital adequacy requirement.

Royal Bank was licensed as a universal bank in October 2012. It has over the last few years experienced solvency and acute liquidity challenges. An on-site examination conducted by the Bank of Ghana in 31st March, 2018 revealed a number of irregularities.

The Bank of Ghana appointed an advisor for Royal Bank in May 2018 to advise management of the bank, with the primary mandate to stabilize and improve the affairs of the bank.

Based on the Bank of Ghana’s assessment, Royal is insolvent and faced with acute liquidity challenges. Specifically:

• The bank suffered severe capital impairment due to under-provisioning for loans, over estimation of investments with other financial institutions, and overstatement of capital on account of fixed assets which were rejected by the Bank of Ghana for capital purposes. This resulted in an adjusted capital of negative GH¢484 million,
yielding a CAR of negative 80.53 percent. a capital deficiency of GH¢567.78 million and a net-worth of negative GH¢498.63 million as at 31st May, 2018;

• The bank has persistently faced serious liquidity challenges since September 2017, resulting in the continuous breach of the cash reserve ratio required by section 36 of Act 930. It has survived on liquidity support totaling GH¢ 295 million;

• Its non-performing loans constitute 78.79 percent of total loans granted, owing to poor credit risk and liquidity risk management controls;

• A number of the bank’s transactions totaling GH¢161.92 million were entered with shareholders and related parties structured to circumvent single obligor limits under Act 930, conceal related party exposure limits under Act 930, and to overstate the capital position of the bank for the purpose of complying with the capital adequacy requirement.