UT Bank, Capital Bank Collapsed?

BoG
BoG

Accra, August 14, 2017//-Bank of Ghana (BoG) has withdrawn the licenses of UT Bank and Capital Bank over severe capital impairment.

To this end, the BoG has approved a Purchase and Assumption transaction with GCB Bank Ltd that transfers all deposits and selected assets of UT Bank Ltd and Capital Bank Ltd to GCB Bank Ltd.

The remaining assets and liabilities will be realised and settled respectively through a receivership process to be undertaken by Messers Vish Ashiagbor and Eric Nana Nipah of PricewaterhouseCoopers (PwC).

The main offices and branches of UT Bank and Capital Bank will be under the control of GCB bank and will be opened at 1pm today for normal business transactions. Customers of UT Bank and Capital Bank are now customers of GCB bank. All deposit customers will continue to have access to their funds. UT Bank and Capital Bank branches and ATMs will continue to operate as normal as GCB bank branches and ATMs. All staff in the interim will become staff of GCB bank and GCB Bank will negotiate the terms of their contract.

GCB was selected amongst 3 others on the basis of purchase price, cost of funding, branches to be retained, staff to be employed and impact on the acquiring bank’s capital adequacy ratio.

The Bank of Ghana assures the public that all customers can continue normal banking business at all UT Bank and Capital Bank facilities which are now branches of GCB bank.

The approval by the Bank of Ghana of this transaction is to strengthen Ghana’s banking sector, ensure financial stability and protect depositors’ funds. The Bank of Ghana reassures customers of UT Bank and Capital Bank that their money is safe and they can continue to do business at their respective branches which are now the branches of GCB Bank.

The main offices and branches of UT Bank and Capital Bank will be under the control of GCB bank and will be opened at 1pm today for normal business transactions. Customers of UT Bank and Capital Bank are now customers of GCB bank. All deposit customers will continue to have access to their funds. UT Bank and Capital Bank branches and ATMs will continue to operate as normal as GCB bank branches and ATMs. All staff in the interim will become staff of GCB bank and GCB Bank will negotiate the terms of their contract.

GCB was selected among three others on the basis of purchase price, cost of funding, branches to be retained, staff to be employed and impact on the acquiring bank’s capital adequacy ratio.

The Bank of Ghana assures the public that all customers can continue normal banking business at all UT Bank and Capital Bank facilities which are now branches of GCB bank.

The approval by the Bank of Ghana of this transaction is to strengthen Ghana’s banking sector, ensure financial stability and protect depositors’ funds. The Bank of Ghana reassures customers of UT Bank and Capital Bank that their money is safe and they can continue to do business at their respective branches which are now the branches of GCB Bank.

The Bank of Ghana was forced to take this action based on provisions of the current Banking and Specialized Deposit Taking Institutions Act.

In the law, Sections  104-107 discusses prompt corrective actions for banks with various degrees of capitalization requiring the regulator to step in after 90 days or 100 days, if the bank in question fails to recapitalise or submit to the Bank of Ghana, a capital restoration plan.

Also, in Section 123, the law empowers the Central Bank to REVOKE THE LICENSE OF ANY BANK THAT IS INSOLVENT OR LIKELY TO BECOME INSOLVENT WITHIN THE NEXT 60 DAYS.

The law particularly requires the Central Bank to appoint a receiver and take remedial actions against banks that have negative capital adequacy ratios.

Other analysts also say that the Bank of Ghana went ahead with this action because they were not satisfied with the capital restoration plans brought forward by these two banks, and the law grants them the powers to go along this path if it is not satisfied with proposed plans from the ‘sick’ banks.

The same banking law requires the election of an official administrator, either appointed by the Central Bank or a bank elected by the Central bank, to handle resolution proceedings by taking stock of loans that remain in good standing and deposits and take hold of the accounting books of the bank that has had its license withdrawn.

Effects

This means that legally the two banks cease to exist as a bank, from today, Monday, August 14, 2017, that is why GCB has been appointed to take over the assets and liabilities of these two banks.
Also, it could mean that all the two bank assets, workers, good loans and even the bad debts would be taken by GCB.

African Eye Report gathered that the Government and SSNIT, the two major shareholders of the Bank have given their blessing to the move.

This would see the government take on the bad loans, a move that will worsen the overall fiscal situation. If the government, on the other hand, decide to issue bonds to cover the bad loan position of Capital Bank and UT Bank, so that, it does not affect the financial position of GCB, there would be implications for the country’s overall unfavorable debt position, according to Joy Business report.

Since the two banks would legally cease to exist, GCB would also take up any contractual arraignment with its clients including good and bad loans.  However, in the case of UT which is a listed entity, this development could possibly result in the institutions de-listing from Stock Exchange.

Investors could in the process, dump their UT shares on the stock and this could result in other secondary consequences, it added.

African Eye Report

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