The Bank of Ghana has appointed KPMG as official administrator for UniBank Ghana Limited to save the bank from imminent collapse.

KPMG as Official Administrator will assume control of the bank and all its branches and carry out the responsibilities of the shareholders, directors, and key management personnel of UniBank with effect from Monday March 20.

Section 107 of Act 930 empowers the Bank of Ghana to appoint an Official Administrator to take official control of a bank when its capital adequacy ratio (CAR) has fallen below 50 per cent of the required minimum of 10 per cent (i.e. below 5 per cent).

“The appointment by the Bank of Ghana of the official administrator is aimed at saving UniBank from imminent collapse. It will prevent potential losses to depositors and other creditors, and ensure that the financial condition of the bank does not create further risks for the entire financial system,” Dr Ernest Addison, Governor the Bank of Ghana told a press conference.

Dr Addison said in line with its powers under Act 930, KPMG would ascertain the state of the bank’s assets and liabilities, and exercise a variety of powers to rehabilitate and return the bank to regulatory compliance and viability within a period of six months, at the end of which the bank will be returned to private ownership and management.

“During the period of official administration of UniBank, the bank will remain open for business under the management and control of KPMG overseen by the Bank of Ghana, and is not being closed and liquidated,” he emphasised.

Dr Addison said UniBank’s problems were part of the legacy issues in the financial sector attributed to weak economic growth and poor corporate governance and risk management practices.

He said UniBank was one of nine banks identified after the asset quality review exercise undertaken in 2016, to be significantly undercapitalised with a CAR of 4.75 per cent.

The Governor said as part of efforts to recapitalise the bank, Unibank submitted capital restoration plans to the Bank of Ghana which it implemented to build up its capital to 7.7 per cent in August 2017.

Subsequent reviews of UniBank’s books by Bank of Ghana’s supervision teams showed that the bank had not reported the state of its loan book accurately, the Governor said.

Consequently by October 2017, its CAR was estimated at negative 12.5 per cent, making it technically insolvent. By December 2017, its CAR had dropped further to negative 24 per cent.

“The bank has failed to submit its monthly returns to the Bank of Ghana for January and February 2018, and as a result, Bank of Ghana has no evidence to suggest that its CAR has been restored to the regulatory minimum of 10 per cent,” Dr Addison said.

He said efforts made by Bank of Ghana’s supervisory teams who visited the bank’s head office several times this month to obtain current information on the bank’s financial health, proved futile as the bank’s management failed to cooperate with the Bank of Ghana staff on site.

The appointment of the Official Administrator has therefore become necessary due to the fact that uniBank has, among other things persistently maintained a capital adequacy ratio (CAR) below zero (currently negative 24 per cent, making it technically insolvent.

He said Unibank had also persistently suffered liquidity shortfalls and consistently breached its cash reserve requirement, and had to rely extensively on liquidity support (over GH¢2.2 billion) from the Bank of Ghana over the past two years to meet its recurring liabilities.

Among other things, a key shareholder of the bank managed to obtain liquidity support from the Bank of Ghana using third party banks as its agents. The Bank of Ghana’s exposure to the bank was therefore underestimated by nearly GHS 400 million, as this amount was not reflected in its books, the Governor said.

The Governor said Unibank conducted its credit administration in a manner that had jeopardised the interests of depositors and the financial sector as a whole and failed to comply with a directive of the Bank of Ghana dated 26th October, 2017 under section 105 of Act 930, prohibiting the bank from granting new loans and incurring new capital expenditures.

The bank also failed to comply with several other regulatory requirements, including lending to a number of borrowers in excess of its regulatory lending limit, borrowing from the inter-bank market without the written approval of the BoG when its CAR was less than the prescribed 10 percent.

It also outsourced a number of services such as those of tellers, receptionists, and security, to affiliate companies without the prior approval by the Bank of Ghana.

It refused to cooperate with the Bank of Ghana in the performance of its supervisory responsibilities, including deliberately concealing some liabilities from its balance sheet, and failing to submit documents and records for supervisory inspection.

Besides, poor corporate governance and risk management practices rendered the bank vulnerable to macroeconomic shocks.

In spite of the Ministry of Finance recently agreeing to absorb a significant amount of the debts of Government contractors owed to the bank to the tune of Gh¢428,817,961 (backed by Interim Payment Certificates issued to contractors), the bank has not been able to address its capital deficiency, which has continued to deteriorate.

Also, the bank engaged in significant transactions with its parent company and affiliate companies including connected lending and other related party transactions without sufficient controls as required by law.

“Allowing the continuation of UniBank’s activities in their current form would be detrimental to the interests of depositors and the banking system as a whole,” he said.

Dr Addison reassured customers of UniBank that all deposits with UniBank are, and will remain, safe and that they can continue to do business at any of its branches.

The Governor said the central bank remained committed to supporting the orderly development of Ghana’s banking sector, including indigenous Ghanaian banks, while promoting a strong and resilient sector to drive Ghana’s economic growth.

Related Reading: Agricultural Bank Rejects Unibank’s Takeover Advance