Notice Of Revocation Of Licences Of Insolvent Savings And Loans Companies And Finance Houses, And Appointment Of A Receiver

The Bank of Ghana has, with effect from today, revoked the licences of twenty-three (23)
insolvent savings and loans companies and finance house companies (see Annex 1).
These actions were taken pursuant to Section 123 (1) of the Banks and Specialised
Deposit-Taking Institutions Act, 2016 (Act 930), which requires the Bank of Ghana to
revoke the licence of a Bank or Specialised Deposit-Taking Institution (SDI) where the
Bank of Ghana determines that the institution is insolvent. The Bank of Ghana has also
appointed Mr. Eric Nipah as a Receiver for the specified institutions in line with section
123 (2) of Act 930.
The revocation of the licences of these institutions has become necessary because they
are insolvent even after a reasonable period within which the Bank of Ghana has
engaged with them in the hope that they would be recapitalized by their shareholders
to return them to solvency. It is the Bank of Ghana’s assessment that these institutions
have no reasonable prospects of recovery, and that their continued existence poses
severe risks to the stability of the financial system and to the interests of their
depositors.
In line with the Government’s commitment to protect depositors’ funds, the
Government has made funds available to enable the Receiver pay depositors after their
claims are validated. The Receiver will in due course make an announcement with
regards to when and where payments will be made. The Receiver will also indicate
documents required from depositors to facilitate the validation of claims and orderly
payment of validated deposits. Other creditors of the failed institutions will be settled by
the Receiver upon validation of their claims and to the extent that the Receiver is able to
realise value from the remaining assets of these institutions.
The Bank of Ghana has also with effect from today, revoked the licences of two nonbank financial institutions, namely Express Funds International Ltd (remittance
company) and Ghana Leasing Company Ltd (leasing company) which are insolvent
and have been inactive for a number of years. This action is pursuant to Section 7 of the
Non-Bank Financial Institutions Act, 2008 (Act 774), which mandates the Bank of Ghana
to revoke the licence of a non-bank financial institution licensed under that Act if that
institution among other things ceases to carry on business. The Bank of Ghana has
notified the Registrar of Companies of the revocation of these two licences and has
BANK OF GHANA E S T. 19 5 72 requested that the Registrar commences winding-up proceedings against these
companies under the Bodies Corporate (Official Liquidations) Act, 1963 (Act 180).
Background
As part of its efforts to restore confidence in the banking and specialized deposit-taking
sectors, the Bank of Ghana embarked on a clean-up exercise in August 2017 to resolve
insolvent financial institutions whose continued existence posed risks to the interest of
depositors.
A comprehensive assessment of the savings and loans and finance house sub-sectors
carried out by the Bank of Ghana in the last few years, identified serious challenges (see
Annex 2), summarized as follows:
a. The levels of capital held by some savings and loans companies and finance house
companies were in violation of the minimum regulatory capital required by Act
930. This made it precarious for these institutions to continue to undertake the
business of specialized deposit-taking institutions, given the risks they posed to
their depositors and other counterparties to whom they were exposed directly or
indirectly;
b. Excessive risk-taking without the required risk management function to manage
risk exposures;
c. The use of depositors’ funds to finance personal or related-party projects or
businesses on terms that were not commercial, leading to little or no income
accruing to the relevant savings and loans companies or finance house companies
and thereby compounding their liquidity challenges;
d. Corporate governance weaknesses with weak Board oversight, poor accountability,
and override of internal controls;
e. Creative accounting practices and under-provisioning for impaired assets, thereby
misrepresenting their true financial condition to the Bank of Ghana and other
stakeholders; and
f. Persistent regulatory breaches, involving non-compliance with Bank of Ghana’s
prudential rules, and failure to implement Bank of Ghana on-site examination
recommendations.
All efforts by the Bank of Ghana to get the shareholders and directors of the affected
institutions to rectify the above lapses, especially the significant capital deficiencies,
yielded no positive results. Consequently, the financial position of these institutions has
continued to deteriorate, leading to their insolvency with some of them ceasing
operations and closing their offices to depositors whiles those currently in operation are
unable to pay depositors and other creditors at all or fully.
3. Given the risks that these institutions continue to pose to the entire financial system and
the need to protect the interest of depositors, the Bank of Ghana is sanitizing this subsector through the orderly resolution of the failed institutions in accordance with Sections 123 to 137 of Act 930.
The Bank of Ghana has with effect from today, completed the clean-up of the
banking, specialized deposit-taking (SDI), and non-bank financial institutions
(NBFI) sectors which began in August 2017. This follows the revocation of the
licences of nine (9) universal banks, 347 microfinance companies (of which 155 had
already ceased operations), 39 micro credit companies/money lenders (10 of which had
already ceased operations), 15 savings and loans companies, eight (8) finance house
companies, and two (2) non-bank financial institutions that had already ceased
operations.
The Bank of Ghana is committed to ensuring that the banking, SDI, and NBFI sectors
remain resilient, inclusive, and supportive of Ghana’s economic growth trajectory. To
ensure that the remaining institutions remain resilient going forward, the Bank of Ghana
will remain vigilant, intensify on-site examinations and enforcement actions including
the application of sanctions for non-compliance with statutory, prudential and other
requirements, and ensure that early warning signs of distress are mitigated by regulated
institutions expeditiously. The Bank of Ghana will also work with ARB Apex Bank to
reposition the rural and community banking sector, to enable them to better support
rural economic development. Furthermore, the Bank of Ghana and the Government of
Ghana will also launch the commencement of operations of the Ghana Deposit
Protection Scheme in September 2019 to further strengthen protection of depositors’
interests.