We woke up on Monday morning, 14th August 2017, to be hit with the news; UT BANK & CAPITAL BANK taken over by GCB Bank. Their licenses revoked and taken over in a bit of a ninja style with immediate change over of branding for almost 54 branches of both banks! Yes the stories of these banks struggling have been in the woods for a long while now. I’ m sure some political considerations played a part in letting these banks stay in operation to still pick up more liabilities and dig the holes deeper, but again not too bad because that could have been an extended time for the banks to bring things in line.
Though not much figures are available now, this would remain a historical event in our banking circles for a long time. Just as Ghanaians will never forget the Bank for Housing and Construction and Cooperative Bank debacle in the late 90s, so would we not forget this with all the entanglements of DKM, ASN Financial Services and God is Love Fun Club.
There are a furor of reactions to this twin-bank collapse, but more chewable and analytical information would seep through when the dust settles. Some few things that however strike my heart is the fact that these two banks were both Ghanaian-grown banks and the fact that they are all serial award winners. But for anyone who knows the dynamics of the collapse of a bank this is not a surprise at all. Lehman Brothers, an over 100 year old bank collapsed and staff got to know just one morning.
This event brings about a serious examination and introspection of not only the banking system but our general corporate leadership, entrepreneurial behaviours, political and industry regulations.
My initial take on this issue as we wait for more to unfold is that we are only eating the fruit of WEAK GOVERNANCE. I can bet that about 90% of Ghanaian-owned companies suffer this fate and that is where it all starts from. John C Maxwell once said ‘Everything Rises and Falls on Leadership’.
The regulator has more to do in strengthening the Governance framework and most likely all others will fall in line. I should however commend the Central Bank in how they have handled this mess. It looks to me more like a government bailout. But that is all good as long the public had been managed well and it won’t stop here. The US FED did it for companies like AIG and that has proven worthwhile. At least Trump hasn’t criticized Obama on it yet, not that I am aware of.
A few more questions to ask though;
How did the central bank hold the board and management to account when these signs of distress were spotted?
First Capital Plus (FCP) Savings & Loans got the license to become a bank, what were the considerations for granting the license because it was a well-known fact that even as savings & loans they were struggling.
UT has been struggling since they moved into the banking space, are they because of intense diversification, poor asset management or what?
Is this a test for Savings & Loans migration into the universal banking space?
Does it mean the financial statements published were ‘engineered ‘? If so how should we view the integrity of financials made public?
Does it mean we now turn to only government-owned and foreign banks?
What is the credibility of these awards event organisers and their accounting giants run?
A lot more questions are going through my mind but we wait and hear more of the matter. These Ghanaian banks are gone, hard won reputations are dented, over 900 employees don’t know their fate, customers are not sure what becomes of their assets, but these are all real factors of industry developments within every developing nation. They are normal and yes we will see more in the coming months if not years. More so I see a posture of the central bank as one ready to bite the bullet to create sanity in the financial system. Let’s just brace up ourselves.
Credit: A Ghana Talks Business Editorial