Ladies and Gentlemen, when the current Management of the Bank of Ghana took office in early 2017, the banking sector was faced with many challenges. We inherited a financial system which was under a considerable state of distress, with banks that were not meeting the capital adequacy requirement and others whose capital was eroded with high non-performing loans. Some of these banks were insolvent and illiquid, others were solvent but illiquid.

This state of affairs was largely a result of poor corporate governance, false financial reporting, and insider dealings. The Bank of Ghana had in the past continued to provide liquidity support to these failing banks, without addressing the underlying problems that led to the illiquidity and insolvency of these institutions.

In short, the financial system had reached a tipping point and we could not have assumed business as usual. The Bank of Ghana, therefore, embarked on a comprehensive reform agenda, with the objective of cleaning up the sector and strengthening the regulatory and supervisory framework for a more resilient banking sector.

As part of this reform exercise, the banking licences of seven (7) insolvent banks were revoked over the last sixteen months. Steps were taken to ensure that they exited the market in an orderly manner.

Furthermore, the Bank of Ghana on 11^th September 2017 issued the Minimum Capital Directive (BG/GOV/SEC/2017/19) by which all universal banks were required to increase their minimum paid-up capital to GHC400 million by 31^st December 2018. Banks were required to comply with the new minimum paid-up capital requirement through (i) a fresh capital injection; (ii) capitalisation of income surplus; or (iii) a combination of fresh capital injection and capitalisation of income surplus.

The Minimum Capital Directive was part of regulatory measures aimed at strengthening and making the banking sector more resilient to shocks as well as to help reposition the banks to better support the growing needs of the Ghanaian economy. It was also the expectation of the Bank of Ghana that the recapitalisation exercise would help promote consolidation in the banking industry through sustainable mergers and acquisitions along with stronger corporate governance structures and risk management systems and practices.

UPDATE ON RECAPITALISATION EXERCISE

Following the recapitalisation exercise that ended at the close of business on 31^st December 2018, there are now 23 universal banks operating in Ghana. These banks have all met the new minimum paid-up capital of GHC400 million. A schedule of banks and how they have met the new requirement is attached as Annexure 1.

In particular:

- Sixteen banks have met the new minimum paid-up capital requirement of GH¢400 million mainly through capitalisation of income surplus and fresh capital injection.

- The Bank of Ghana has approved three applications for mergers. Consequently, First Atlantic Merchant Bank Limited and Energy Commercial Bank have merged, Omni Bank and Bank Sahel Sahara have merged, and First National Bank and GHL Bank have merged. The three resulting banks out of these mergers have all met the new minimum capital requirement. 

- Some private pension funds in Ghana have injected fresh equity capital in five indigenous banks through a special purpose holding company named Ghana Amalgamated Trust Limited (GAT). In addition to the state-owned banks (ADB, NIB) benefiting from the GAT scheme, the other beneficiary banks (the merged Omni/Bank Sahel Sahara, Universal Merchant Bank, and Prudential Bank) were selected by GAT on the basis of their solvent status and good corporate governance. More details about the GAT scheme will be provided by GAT and the Ministry of Finance.

To ensure that the capital provided by banks indeed represents quality capital in the amounts required to meet the Minimum Capital Directive, the Bank of Ghana adopted and implemented a rigorous capital verification process. In the process, the Bank of Ghana has undertaken comprehensive due diligence on new investors in banks and has verified the sources of funds for the recapitalisation. The verification process is still on-going and will be validated by external auditors of banks as part of the 2018 external audit.

RECAPITALISATION AND RESTRUCTURING OF STATE-OWNED BANKS

Resources from GAT will be used to recapitalize the two state-owned banks (ADB and NIB) to help drive and promote long-term sustainable financing for agricultural and industrial expansion. The Government has notified the Bank of Ghana that it intends to restructure NIB through governance and management reforms as well as streamlining its business model to help refocus it as a bank to industrialisation.

To help ensure that these reforms succeed, the Bank of Ghana has today appointed an advisor for NIB, pursuant to section 101 (1) of the Banks and Specialized Deposit-Taking Institutions Act of 2016 (Act 930), to advise management of the bank with a view to helping improve the affairs of the bank. The Advisor will hold office until otherwise advised by the Bank of Ghana and will furnish the Bank of Ghana with a status report on the bank in three months and as frequently as the Bank of Ghana may require.

GN BANK OBTAINS A SAVINGS AND LOANS LICENCE

GN Bank (GN) was unable to comply with the Minimum Capital Directive by 31^st December 2018. Consequently, GN Bank has applied for, and the Bank of Ghana has approved the grant of a savings and loans company licence. The Bank of Ghana has also approved a transition plan submitted by GN for winding down aspects of its business which are not compatible with a savings and loans company licence. The Bank of Ghana will closely monitor implementation of the approved transitional plan which is expected to be completed by the end of June 2019.

In this regard, the Bank of Ghana has appointed an advisor for GN pursuant to section 101 (1) of the Banks and Specialized Deposit-Taking Institutions Act of 2016 (Act 930), to advise management of GN with a view to ensuring a smooth transition to a viable savings and loans company. The Advisor will hold office until otherwise advised by the Bank of Ghana and will furnish the Bank of Ghana with a status report on the GN in three months and as frequently as the Bank of Ghana may require.

VOLUNTARY WINDING-UP OF BANK OF BARODA (GHANA) LIMITED

The Bank of Baroda (Ghana) Limited was licensed by the Bank of Ghana as a universal bank on 28^th January 2008. It is a wholly-owned subsidiary of Bank of Baroda India which is in turn wholly-owned by the Government of India.  By a letter dated 9^th April 2018, the Bank of Ghana was notified by the Bank of Baroda, India (the parent company of Bank of Baroda (Ghana) Limited) of its decision to divest/sell its entire 100% equity in the bank due to the Government of India’s decision to rationalise the overseas operations of the branches/subsidiaries of Indian public sector banks. The Bank of Ghana has since approved a request for a voluntary winding up of the operations of Bank of Baroda (Ghana) Limited effective December 31, 2018. To ensure an orderly exit, and to safeguard the interest of depositors and customers, the Bank of Ghana has approved an Assumption Agreement between Bank of Baroda (Ghana) Limited and Stanbic Bank Ghana Limited under which the latter will assume all deposits and selected loan assets of the bank. The Bank of Ghana will closely monitor the transition and is confident that Stanbic Bank Ghana Limited will ensure that depositors of Bank of Baroda (Ghana) Limited continue to have access to their deposits.

RESOLUTION OF PREMIUM BANK LIMITED AND HERITAGE BANK LIMITED

Pursuant to Section 123 of the Banks and Specialised-Deposit-Taking Institutions Act, 2016 (Act 930), the Bank of Ghana has revoked the banking licences of Premium Bank Limited and Heritage Bank Limited with effect from the date of this Notice and has appointed Mr. Vish Ashiagbor of PricewaterhouseCoopers as Receiver for the two banks. Complete details of the bases on which the licences of the two banks have been revoked are attached as Annexures 2 and 3. Among other things:

- Premium Bank was found to be insolvent as of 30^th November 2018 with a capital adequacy ratio of negative 125.26%;

- Heritage Bank among other things obtained its banking licence on 4^th October 2016 on the basis of capital with questionable sources. Furthermore, the bank was unable to meet the new minimum capital requirement of GHC 400 million as of 31^st December 2018.

The Bank of Ghana has also approved a Purchase and Assumption Agreement between the Receiver and Consolidated Bank Ghana Limited (CBG) under which the Receiver has transferred some assets and liabilities of the two banks to CBG. All deposits (current, savings and fixed deposit accounts) of the two banks have been transferred to CBG with effect from the date of this notice. The Government of Ghana has issued a bond in the face of GHC 1.403 billion to CBG to cover the gap between the value of the good assets and liabilities of the two banks transferred to CBG. All deposits of the two banks are safe and customers will continue to have full access to their funds. 

CONCLUSION

Ladies and gentlemen, it has been an eventful last twenty months during which the Bank of Ghana has had to take tough but necessary bold steps to clean up the banking sector and to reposition it to support the economic growth and transformation agenda for Ghana. The just-ended recapitalisation exercise has repositioned the banking sector as better capitalised, liquid, stronger, and more resilient. The on-going strengthening of the regulatory and supervisory framework will also ensure that the sector is well-governed, well-managed, and better supervised to restore and maintain much-needed confidence in the sector. In particular, the Bank of Ghana expects that:

- Shareholders of banks will exercise control over these institutions not for the benefit of shareholders and related and connected parties, but primarily in the interest of depositors, creditors, employees, and other stakeholders;

- Bank Boards will be composed of persons that are capable of exercising strong and independent oversight. They are expected to ensure that the interests of all relevant stakeholders are protected;

- Risk management will be integrated in the strategic focus of the governance and management of these institutions;

- Compliance with regulatory requirements and ethical standards are embedded in overall risk management;

- Bank of Ghana’s supervisory systems, processes, and teams are better able to identify early warning signs, enforce regulatory requirements and ensure that prompt corrective action is taken by banks to recover quickly from any signs of distress.

Bank of Ghana remains committed to promoting a safe, sound, stable, and resilient financial sector, and counts on the cooperation of all stakeholders.