Board Chairman of the Bulk Oil Storage and Transportation Company (BOST) has resigned from office over the collapse of Sovereign Bank, one of five banks the Bank of Ghana shut down recently over breach of banking regulations.

Kwame Acheampong Kyei resigned as the Board Chairman of the now defunct Sovereign Bank shortly before the revocation of operating licence by the central bank.

Mr Kyei stated in a letter dated August 22 and addressed to President Addo Dankwa Akufo-Addo that “in view of the recent developments relating to my association with the purchase and assumption of Sovereign Bank, and the resulting unfortunate furore in the media I have decided to voluntarily step down as Chairman/Member of the Board of BOST for the time being.”

According to the Bank of Ghana, Sovereign Bank was closed down because it obtained its banking licence under false pretences through the use of suspicious and non-existent capital.

However, in the wake of media discussions of the collapse of the bank, Dr. Kwame Acheampong Kyei explained that he resigned from the Board of Sovereign Bank in March 2018, when he noticed that certain improprieties had taken place in the management of the affairs of the bank without his knowledge.

He suggests that he left Sovereign Bank at least five months before the Bank of Ghana clampdown on the banking sector in August 2018.

Mr Kyei was inaugurated as Chair of a nine-member Board of Directors of BOST in September, however, in the wake of the Sovereign Bank scandal, there were calls for him to step down.

Critics such as Africa Centre for Integrity and Development (ACID-Africa), an anti-corruption advocacy civil society organisation, said the allegation against Sovereign Bank and its Board -- and by extension Mr. Kyei -- by the central bank made him unfit to be Board Chair of BOST.

Photo: Mr Kyei (4th from right), the Board of Directors and other officials of BOST during the inauguration in September.

In his letter of resignation, Mr Kyei explains that he was leaving his post at BOST "in order to save Government and BOST what is unfortunately distractive adverse commentary and propaganda in sections of the media."

He, however, clarified: "for the record, this resignation is not an admission of any complicity and/or wrongdoing or whatsoever."

Bank of Ghana action

The Bank of Ghana on August 1 granted a universal banking licence to Consolidated Bank Ghana Limited established by the Government. 

The Bank of Ghana also on the same day revoked the licences of uniBank Ghana Limited, The Royal Bank Limited, Beige Bank Limited, Sovereign Bank Limited, and Construction Bank Limited and merged them in the Consolidated Bank.

The central bank appointed Mr. Nii Amanor Dodoo of KPMG as the Receiver for the five banks.

Related: How ¢195m BoG money to rescue Capital bank was used to set up Sovereign Bank

Sovereign Bank: BoG explains reasons for revocation of licence

Sovereign Bank Limited was licensed as a universal bank in January 2016 and began operations in April 2016.

As part of Bank of Ghana’s investigations into the failure of Capital Bank Limited (currently in receivership), it emerged that Sovereign Bank’s initial capital contributed by its shareholders was funded from transfers from Capital Bank which had been presented to the Bank of Ghana as investments on behalf of the bank.

Click to read the BoG explanation for closing down the five banks.

Subsequent to its licensing, a substantial amount of the bank’s capital was placed with another financial institution as an investment for the bank. The bank has however not been able to retrieve this amount from the investment firm with which it was placed, and it has emerged that the investments were liquidated by the shareholders and parties related to them. Following enquiries by the Bank of Ghana, the promoters of the bank admitted that they did not pay for the shares they acquired in the bank.

The promoters of the bank have since surrendered their shares to the bank, while the directors representing those original shareholders have since resigned. In April 2018, the Bank of Ghana appointed an Advisor to advise the management of the bank with a view to improving the affairs of the bank. Following further deterioration in the capital of the bank due to its inability to recover the investments placed with financial institutions, as well as impairments to its loan book, its capital adequacy ratio is currently negative 11.

The Bank of Ghana has concluded that Sovereign Bank is insolvent, and that there is no reasonable prospect of a return to viability. The bank is unable to meet daily obligations as they fall due. Liquidity support granted so far to the bank amounts to GH¢12 million as of May 2018. The bank has not been able to publish its audited accounts for end-December, 2017 breaching section 90 (2) of Act 930.

The bank’s current situation has resulted in persistent breaches of key regulatory requirements and prudential limits.