Ghana: How uniBank was killed by the government
Throughout this in-depth report, Africawatch reveals how the clandestine mission by the government to kill uniBank actually unfolded. We take readers through the destructive actions undertaken by the Ministry of Finance, headed by Ken Ofori-Atta, the Bank of Ghana, led by Dr. Ernest Addison, and the Official Administrator/ Receiver, KPMG, headed by Nii Amanor Dodoo, and show how they all knowingly colluded to kill one of Ghana’s most promising indigenous banks.
Documents that have recently come into the possession of Africawatch prove that one of Ghana’s largest indigenous banks, uniBank, was actually destroyed on political grounds simply because the majority shareholder of the bank, Dr. Kwabena Duffuor, the former Governor of the Bank of Ghana and later Minister of Finance under the late President John Atta Mills, belonged to the main opposition party.
Otherwise, the bank could have been saved, and in fact deserved to have been saved, by President Nana Akufo-Addo’s government. But because Dr. Duffuor belonged to the opposition National Democratic Congress (NDC), his bank had to die, deliberately killed by the ruling New Patriotic Party (NPP) government for the sake of politics! And all this played out under the keen eyes of the president’s cousin, Finance Minister Ken Ofori-Atta, who, with the active assistance of the Bank of Ghana (BoG), dealt uniBank a sleight of hand and then buried it.
A branch of uniBank, a successful indigenous bank, which was shut down by the NPP government, apparently because its majority shareholder belonged to the main opposition political party.
Sadly for Ghana, in the rush to kill this bank, Akufo-Addo’s government, represented by the Ministry of Finance and the BoG, consciously broke almost all the laws governing the banking sector just so they could dispatch uniBank into the netherworld with ease, if not with impunity.
Even the Office of the Attorney General and Ministry of Justice, headed by another of Akufo-Addo’s relatives, Gloria Akuffo, found the unlawful actions of the Ministry of Finance and the BoG so shocking that it sent a 11-page letter on January 25, 2019, to Ofori-Atta, rebuking the actions taken to close down uniBank.
This is a story that brings no honor to Ghana’s current government, especially how the government itself, the Ministry of Finance, the central bank, and the many quasi-government entities which owed uniBank about GH¢1 billion would not pay their indebtedness to help the bank stay afloat. It was callousness writ large, and whoever benefitted from that callousness only Ofori-Atta can tell – because he had in his gifts the power and resources to stop uniBank from going under, but he chose not to do it.
Worse, the Official Administrator and later Receiver appointed by the BoG to handle the uniBank matter, the international accounting firm KPMG, behaved as though it was part of the staff of the Ministry of Finance, if not the errant BoG, and thus helped to hasten the end of uniBank instead of saving it, as KPMG was actually mandated to do.
KPMG’s role in the affair so shocked the uniBank shareholders that they still insist that Nii Amanor Dodoo, the KPMG official who acted as the Official Administrator for uniBank and was later made Receiver, was “illegally appointed” by the BOG. “Was this appointment a reward for carrying out BoG’s agenda?”, the shareholders ask.
According to the shareholders: “What was also not made known to the public was that the BoG and Nii Amanor Dodoo willfully failed to comply with Section 122(8) of Act 930, which prevented Nii Amanor Dodoo from holding any office in a bank which had undergone official administration, for a period of at least two years. How could such a monumental breach of the law occur if not as a result of a deliberate and brazen plot to cover up any ‘lapses’ that may have occurred on the part of the Official Administrator during his tenure?”
In the beginning
The story starts on August 1, 2018 when the BoG revoked the license of uniBank Ghana Limited and by that act killed a vision that was birthed in 1997 by Dr. Kwabena Duffuor and his partners to create a pan-African bank in Ghana to help fund the economic aspirations of not only Ghana but the African continent as a whole.
Dr. Kwabena Duffuor, the majority shareholder of uniBank
Before the bank was brutally closed down, it endured what the bank’s shareholders call “unprecedented, unreasonable, unjustified, unannounced and unilateral audits, downgrades and impairments of its loan book and other assets, including even government, quasi-government, Ministry of Finance and Bank of Ghana exposures. After the indecent collapse of the bank, it became clear that these deliberate and calculated audits of the bank’s operations and the downgrades of its assets were done to drive it further into the abyss of insolvency and provide grounds for the targeted revocation of the licence.”
That action by the BoG ended an illustrious 18-year history that began on Feb. 3, 2000, when uniBank received its universal banking license from the BoG and commenced operations in 2001 with an initial stated capital of GH¢870,000.
After using the first few years to stabilize, uniBank experienced exponential growth over a 10-year period, between 2006 and 2016, and became a major fixture of the Ghanaian banking sector.
UniBank was flying. From 2006, the bank’s stated capital increased from a mere GH¢7m to GH¢295m in 2016. Total deposits jumped from GH¢25.10m in 2006 to GH¢2.62bn in 2016. Loans and advances increased from GH¢15.72m in 2006 to GH¢2.88bn in 2016. Total assets increased from GH¢37.25m in 2006 to GH¢5.74bn in 2016. The future was bright for uniBank, and nothing in its stars showed that just two years from 2016 this prosperous indigenous bank would be dead … and buried!
But the undertakers involved had different plans. The year 2016 happened to be the year the NPP won both the presidential and parliamentary elections with a landslide and took office on January 7, 2017. Then things soon changed for uniBank.
Here was a bank that had distinguished itself in the areas of customer service and digital banking. Its huge investment in IT had paved the way for improved services and the delivery of top-notch banking to over 400,000 customers in 54 branches nationwide.
Among Ghana’s new breed of banks, uniBank was way ahead of the competition. With the right structures in place – competent and highly-motivated staff, sophisticated infrastructure and a good brand – uniBank doubled down on its growth and in the process built a Ghanaian brand that was comparable to its peers in the West African subregion.
A leading indigenous lender, uniBank became one of the few banks to support the government’s development initiatives by financing mainly the consumer and small/medium enterprises (SMEs) sectors of the economy. Consequently, its loan book increased from GH¢220.6m in 2010 to GH¢536.2m by the end of 2012. Loan repayments were good, and asset quality equally so. Ironically, uniBank’s success in supporting the government’s development initiatives sadly became its downfall.
Starting from 2013, uniBank embarked on an aggressive financing of government and quasi-government projects, especially in the energy and construction sectors. Bulk Oil Distribution Companies (BDCs) became some of the major borrowers from uniBank. Thus, total loans and advances increased from GH¢825.3m in 2013 to GH¢2.88bn in 2016.
However, from 2013 onwards, the government and quasi-government customers could not make their repayments on time to uniBank because the government, then under the NDC’s President John Mahama, was experiencing severe cash problems and therefore could not pay government contractors on time to enable them to make their repayments to uniBank, which had funded their projects.
This resulted in severe liquidity shortfalls and persistent clearing failures for uniBank. In the meantime, redemptions and withdrawals started peaking, forcing uniBank to rely on daily borrowings from other commercial banks, including liquidity support from the BoG, which attracted a high interest rate of 26% per annum.
The conundrum was that if the government contractors and quasi-government entities had been paid what they were owed by the government as and when their payments fell due, then uniBank could have certainly prevented the daily clearing failures that persisted and the rush on deposit withdrawals.
As it happened, between 2013 and 2016, although uniBank’s clients were holding government receivables (Interim Payment Certificates or IPCs) amounting to almost GH¢1.0bn, the government could still not pay the contractors and other clients to enable them to honor their obligations to uniBank.
The delays in the payment of government-related exposures over this period compelled uniBank to rely on the BoG’s expensive liquidity support, which, between 2013 and 2016, cost uniBank an interest payment total of almost GH¢948m.
Furthermore, the delays in repayment to uniBank by government and quasi-government institutions led to non-performance of the bank’s credit facilities, and hence a deterioration in the quality of its assets.
By the end of 2016, these delays had become a major challenge not only for uniBank, but for the whole Ghanaian economy. The inability of the government to pay contractors and other entities had cascaded into the whole economy and led to, in the case of many banks, the non-performance of loans and advances, causing serious deterioration in the quality of assets throughout the entire banking industry.
To resolve the problem, President John Mahama’s government engaged the International Monetary Fund (IMF) to enter into a coordinative arrangement with the Bank of Ghana (BoG) that led to the development of a strategic roadmap to strengthen Ghana’s banking sector.
The cornerstone of that roadmap was an Asset Quality Review (AQR) involving all the banks operating in Ghana. It was a special exercise to assess the quality of the financial exposures in the form of loans, advances and investments. The AQR was completed in March 2017 and identified 9 banks as being undercapitalized, with an aggregate capital shortfall of about 1.6% of GDP.
Unfortunately, uniBank was among those 9 banks. The AQR result showed that uniBank had a Capital Adequacy Ratio (CAR) of 4.71% by March 2017, instead of the mandatory 10%.
Therefore, in accordance with Section 106(1) of the Banks and Special Deposit-Taking Institutions Act, 2016 (Act 930), uniBank’s management had to submit to the BoG, within 45 days, a capital restoration plan and to rectify the significant undercapitalization within 90 days. It also had to restore the bank’s CAR to at least the prescribed minimum of 10% within 180 days from March 20, 2017.
But on March 30, 2017, uniBank’s management requested BoG’s Banking Supervision Department (BSD) to conduct a further review of some selected accounts covering the period up to December 31, 2016, which were downgraded during the AQR exercise. This had become necessary because Ghana’s new government, headed by President Akufo-Addo and the Bank of Ghana, had taken over the debts of all the Bulk Oil Distribution Companies (BDCs), while some of uniBank’s downgraded accounts had improved in terms of loan classification and/or collateral securities, and therefore they had been revalued since the conclusion of the AQR exercise.
The Banking Supervision Department obliged and conducted a review, which reduced uniBank’s impairment figure by GH¢52,599,448.20 as a result of perfected and revalued collateral securities. Accordingly, the BoG told uniBank in a report: “Our re-computation showed that your bank is now undercapitalized with a Capital Adequacy Ratio of 6.07% and a Capital Deficiency of GH¢135,576,056.57 based on your position as at 31 March 2017.”
Following the BSD review, uniBank’s shareholders injected the required capital and restored the bank to a CAR of 10.70% within the timeframe stipulated by the Bank of Ghana. Thus, by July 31, 2017, uniBank had a minimum paid-up capital of GH¢370.13m, which was the highest in the whole banking industry in Ghana.
With its income surplus standing at GH¢51.97m at the time, and a minimum paid-up capital of GH¢370.13m, uniBank had a total paid-up capital of GH¢422.10m when the two were summed up. The total equity stood at GH¢500m, again one of the highest in the industry at the time. Thus, uniBank was solvent by July 31, 2017.
The bank’s turnaround story was so evident that the BoG singled it out as being among three banks in a good position to meet the GH¢400m capital requirement at the time. Thus, for the shareholders, board, management and stakeholders of the bank, it was a relief that the bank had emerged from the AQR exercise stronger than before and it was now on its way to regaining its spot as a formidable indigenous brand strategically positioned to support the growth and development of the economy.
At this point, most people believed that the objective of the roadmap implementation exercise by the central bank was to strengthen the capitalization of Ghanaian banks. Unfortunately for uniBank, this was not to be. Events that unfolded after the AQR exercise showed that a grand and clandestine scheme to harass the bank was just beginning to unfold.
These events gave reason to believe that the roadmap implementation path chosen by the BoG for uniBank was not to strengthen the bank but to drive it into insolvency at all costs in order to justify its resultant collapse.
Trouble started when the BoG singled out uniBank for the high jump. All out of the blue, the central bank embarked on an unplanned monthly auditing (or on-site inspection) of uniBank, with each one ending up in a massive downgrading of uniBank’s loan book.
The rule of thumb in Ghana’s banking industry is for every bank to be audited once a year by the BoG. In the industry parlance, this is called a “planned audit or on-site inspection” by the central bank’s Banking Supervision Department (BSD). The date of the inspection or audit is always communicated well in advance by the BoG, and every bank knows when the central bank auditors would arrive. Every bank gets a report from the BoG after the audit and the banks are obliged to act on their individual reports.
In 2017, however, the BoG decided unilaterally to treat uniBank differently. The bank’s planned audit was scheduled for May 15 to June 21, and uniBank got its audit report on August 15. It showed that the bank’s CAR of 10.7% had fallen to 8.24%, following the downgrading of some selected loans and advances by the BSD during the audit.
As uniBank’s management was studying the BSD audit report with a view of finding the necessary corrective measures, another BSD team of auditors arrived unannounced in August to begin another audit. The team went on to downgrade the same credit facilities that the previous BSD team had audited and downgraded. This time the BSD team downgraded uniBank’s loan book so massively that its CAR fell from 8.24% to 4.80%, meaning that within the month of August alone, uniBank’s CAR had been reduced by the BSD from 10.7% to 8.24% and again from 8.24% to 4.80%.
But worse was to come. In September 2017, yet another BSD audit team arrived unannounced to review the same accounts in an exercise the BSD called a “classification of loan sample”.
In this exercise, the BSD covered 87 accounts (about 72% of uniBank’s total loan book) and downgraded some more credit facilities. This reduced the total paid-up capital from GH¢422.10m to GH¢153.30m. Justifying this unplanned audit, which clearly amounted to harassment, the BoG claimed it was “due to losses being made in the current year. In spite of [uniBank] having the highest paid-up capital of GH¢370.13m, [it] will still have to raise additional funds of GH¢246.80m to make up for the shortfall arising from their impairment of capital,” the BoG said.
But this did not make much sense to uniBank. According to its management, “this comment was and is regrettable because the whole universal banking industry and, indeed all Ghanaians, were aware that uniBank was not a loss-making institution until the BSD began their inexplicable on-site and unplanned monthly auditing and downgrading of the same credit facilities. In fact, all these so-called losses were induced by the BoG’s BSD.”
But more bad news was on the way. In October 2017, the BSD sent yet another audit team unannounced to uniBank to carry out further auditing and downgrading of the same credit facilities that had been downgraded by the three previous BSD teams. This fourth unplanned audit wiped out uniBank’s entire paid-up capital of GH¢422.10m and registered a huge loss in the Income Surplus Account, sending the CAR tumbling into the negative.
In short, between May and October 2017, the BSD sent 4 audit teams to uniBank – 3 of them unannounced – to audit and downgrade the same loan book. This was unprecedented in Ghana’s banking history. It was clear that the BoG was on a mission, working on behalf of its political masters who were determined to kill uniBank at any cost.
Curiously, the BSD’s fourth audit team downgraded even the government’s and quasi-government’s indebtedness to uniBank, which gave the impression that even the whole Government of Ghana (GoG) was insolvent and could not be trusted to pay the debt it owed to uniBank.
At the time, the government and government-related entities owed uniBank a total of GH¢868.974m, broken down into: Cocobod GH¢137,499,785.98. Ministry of Finance GH¢223,049,048,72. Road Fund GH¢229,434,748.82. GETFUND GH¢2,023, 981.10. Bank of Ghana GH¢19,781,376.00. Bulk Oil Distribution Companies GH¢105, 741,493.33. Other government contractors GH¢52,889,558.49. Quasi-government entities GH¢98,553,636.86.
This is the indebtedness that the BSD’s fourth audit team downgraded, causing a dumbfounded uniBank management to say: “The regulator set itself on a pre-conceived course to expropriate the property of the shareholders.” The BSD did not even bother to issue the normal audit reports after the three unplanned audits of uniBank.
Harassing a bank
Despite what clearly appeared to be harassment by the BoG, uniBank’s management and Board continued to work hard in the very hostile environment caused by the BSD. Against all odds, by the end of December 2017, uniBank’s CAR had improved dramatically to a positive 5.20% as a result of a GH¢60m capital injection by the shareholders.
Confirming this in a letter dated February 28, 2018, the BSD stated: “We have reviewed the prudential returns of your bank for December 2017 in accordance with our duties and responsibilities under Section 3 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930). The returns revealed a marked improvement in uniBank’s CAR within one month by 12.28% from negative 7.08% recorded in November 2017 to positive 5.20% in December 2017.”
But the BSD had bad news further on in the letter. Although uniBank’s CAR had improved between November and December 2017, the BSD said it had noted at the same time from the bank’s 2017 returns that there had been “an increase of GH¢760,675,826.23 in gross loans from the September 2017 position of GH¢3,337,574,219.77 to the GH¢4,098,250, 046.00 recorded in December 2017, in spite of the directive from the Bank of Ghana to uniBank to cease granting new loans and advances, both funded and non-funded, except fully cash secured credit facilities”.
The BSD therefore requested uniBank to provide a written response for discussion at a meeting scheduled for March 2, 2018. At the meeting, uniBank’s management explained that: “The increase in gross loans and advances from September 2017 to December 2017 was not due to new advances. As mentioned in an earlier communication to the BoG, we encountered some system challenges after migrating from Temenos banking software R08 to R15. This affected AA Contracts, specifically loans, deposits and borrowings, resulting in some customer contracts not reporting properly. Most of the issues, in consultation with Temenos consultants, have been rectified, resulting in the increase in advances.”
The BSD refused to accept uniBank’s explanation, and without any further investigation or discussion with the bank’s Board of Directors, the BSD cavalierly downgraded the whole GH¢760m.
“It had become clear at this stage”, as uniBank’s shareholders put it, “that the BoG’s Banking Supervision Department had decided to operate outside the powers they had under Act 930. Thus, through arbitrary impairments, inexplicable and unplanned auditing and downgrading of various credit facilities, uniBank’s CAR had reduced from positive 5.20% to negative 24.02% at the end of December 2017 as a result of the impairment of this huge figure of GH¢760m.
“This impairment by the BoG, on the basis of the claim that this was from the granting of new loans between September and December 2017, and the resulting figures provided in a statement to the press by the Governor of the BoG, were unreasonable acts of the central bank, contrary to Articles 23 and 296 of the Constitution of Ghana, and were designed to put uniBank out of business and wipe out the investments of its shareholders.”
BoG’s aggressive monthly auditing and downgrading even affected the GH¢1,338. 90m that uniBank had provided for over and above the provisions made during the annual audit between May and June 2017.
“It was now clear,” say uniBank shareholders, “that the audits and downgrading of uniBank’s credit facilities by the BoG were not only unlawful and in bad faith, but were done with a view to putting uniBank out of business. How can a regulator impair its own exposure to a bank? What kind of central banking logic allows this unethical action?
“By downgrading the exposures of the Government of Ghana, including validated Interim Payment Certificates issued to contractors by the government, the BoG was purporting to declare the Government of Ghana not creditworthy. The shareholders maintain that the BoG acted unreasonably and ultra vires, contrary to their own powers granted by Act 930.”
Letter of contention
Finally fed up, uniBank’s Board of Directors wrote to the BSD on January 18, 2018, expressing deep concern about what the unplanned monthly auditing was doing to the bank. “It is crucial at this stage to draw your attention to the fact that uniBank had not been a loss-making institution until the BSD began their inexplicable on-site monthly auditing and downgrading of the same credit facilities,” the letter said.
“It is also common knowledge that on-site examination by the BSD is conducted once a year in each bank,” the letter continued. “However, in the case of uniBank, in addition to the on-site examination which ended on 15 August, the BSD has had three additional visits, all of which uniBank was not given reasons for.
“All these three visits were spent on auditing and downgrading the same accounts on which the earlier on-site examination had made provisions for. In effect, what it means is that since August these same accounts have been downgraded four times. And the unfortunate aspect is that, the downgrading even included government and quasi-government exposures to uniBank.”
The letter went on: “The unfortunate story of uniBank needs to be told now! It is a story of a leading indigenous bank which had the highest paid up capital in the industry with a CAR of 10.70% at the end of July 2017. A story of a bank that had been featured twice as Ghana’s Sixth Most Prestigious Enterprise in both the 2015 and 2016 ‘Club 100 Awards’, and yet has been weakened in just three months through inexplicable auditing and downgrading of the same credit facilities, including government and quasi-government exposures by the Banking Supervision Department of the central bank…
“It would also be relevant to point out that the activities from 15 August to date were all outside the ‘Examination Plan for 2017’. These ‘off-examination plan for 2017’ activities of BSD sent wrong signals to the market and began to undermine the public confidence in uniBank. Therefore, since 15 August 2017, the bank has been working under extremely strained conditions. It has become even more difficult as the government has not been able to settle or pay the already validated interim payment certificates worth over GH¢800m to uniBank to improve its liquidity.
“We wish to state that the shareholders have no issue with accepting the provisions arising out of the on-site examination which ended on 15 August 2017. However, the shareholders wish to emphatically state that they will not accept the additional provisions stemming out of the inexplicable, additional on-site examinations, contrary to standard practice.
“This deviation from the norm with- out reason or explanation is totally un- acceptable. The shareholders would have expected that if some irregularities or inconsistencies were flagged up during the initial on-site examination, a report would have been prepared and discussed with the management of the bank after which another examination could be undertaken.
“This was not done, yet three more examinations were conducted without even giving uniBank the time to rectify all the concerns raised in the initial report dated 31 August 2017. We must state, that the only report we have received till date is that dated 31 August 2017. No reports were produced for all the subsequent onsite examinations after which accounts were downgraded, again a deviation from the norm.
“In effect, we still stand by the official report dated 31 August 2017, and believe that uniBank will be able to rectify the concerns raised in this August 2017 report by the time the BSD conducts the 2018 on-site examination. This has been the practice which the BSD has followed all these years. The Board has therefore instructed the management of the bank to henceforth rely on the 15 August 2017 BSD examination results as the basis for the preparation of all their returns.”
The letter, which was addressed to the Head of the BSD Osei Gyasi, was signed by Prof. Newman Kwadwo Kusi for the uniBank Board Chairman.
Governor of the BoG, Dr. Ernest Addison – UniBank was killed under his watch, in a mission believed to have been sanctioned by his political bosses.
It was copied to President Akufo-Addo’s office, and additionally to Vice-President Dr. Mahamadu Bawumia; and to the Minister of National Security Albert Kan-Dapaah; to the Governor of the BoG Dr. Addison; to the First Deputy Governor of the BoG Dr. Maxwell Opoku-Afari; to the Head of Research (BoG) Dr. Benjamin Amoah; to the Head of Banking (BoG) Mrs. Peggy Osei-Tutu Dzodzomenyo; to the Acting Head of Financial Markets (BoG) Stephen Opata; and finally to Dr. Kwabena Duffuor II, CEO of uniBank.
But nothing much came out of this widely circulated letter. It was obvious that the political godfathers had already decided the fate of uniBank, and whatever the bank did thenceforth was a lost battle.
Dr. Kwabena Duffuor II, the CEO of uniBank and the son of the majority shareholder Dr. Kwabena Duffuor.
Finally, after 12 days of the letter in its possession, the BSD found the grace to respond on January 30, 2018, explaining that the BoG had taken the steps complained about by the uniBank Board, ie, downgrading uniBank’s loan book, because “after [the] completion of the AQR exercise in March 2017, it was determined that uniBank was significantly undercapitalized with a CAR of 4.71%”.
But the uniBank management denies this claim. “Indeed, this statement from the regulator was incorrect because both the liquidity and solvency of uniBank had improved remarkably between May 2017 and July 2017,” the management says. “In fact, both the BSD and uniBank knew that before the end of the 2017 annual on-site inspection, uniBank’s CAR was 10.70%. The minimum paid-up capital stood at GH¢370.13m and it was the highest minimum paid-up capital in the whole banking industry in Ghana. These were undisputed facts that were alluded to by the BoG itself as explained earlier.”
The BSD’s letter, signed by its Acting Head, Osei Gyasi, defended the three unplanned audits of uniBank, saying “the frequent on-site examination by the BSD to your bank is not unconventional, but necessary due to the risks that uniBank poses to the broader financial system. In any case, the BSD, and for that matter the Bank of Ghana is not precluded from conducting additional or follow-up on-site examination visits on any bank or deposit-taking institution. Kindly see Sections 94 and 95 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) on the conduct of examinations.”
But Osei Gyasi declined to name any other bank, apart from uniBank, that had ever been given that rough treatment (three unplanned monthly audits), even though the law gives the BoG the right to do so.
The Official Administrator
As it were, on March 20, 2018, the BoG announced via a press release that it had appointed KPMG and its official Nii Amanor Dodoo as the Official Administrator (OA) for uniBank.
The BoG stated that it was acting under Section 107 and 108 of Act 930, and specifically emphasized the authority of the Official Administrator under Section 108 as: “To exercise a variety of powers to rehabilitate and return [uniBank] to regulatory compliance within a period of six months, at the end of which the bank will be returned to private ownership and management.”
The BoG added that “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”.
The central bank made it clear that it had taken the action to put uniBank under official administration because the bank had been identified after the Asset Quality Review in 2016 as “significantly undercapitalised with a CAR of 4.75%”. However, the BoG deliberately refused to disclose to the public that uniBank shareholders had also injected additional capital, which had then raised the CAR to 10.70% as at July 2017.
This implied that the BoG relied on the 4.75% CAR for the uniBank roadmap implementation exercise, and not the 10.70% CAR to push the bank under official administration.
“It therefore appeared that the Bank of Ghana had set itself on a pre-conceived course to put uniBank under an official administrator,” says uniBank’s management. “This explained the arbitrary and unethical actions taken by the BSD between 15 August and 31 December 2017.”
Unfortunately for uniBank, the coming into office of the Official Administrator brought with it another round of a tortuous process for the bank.
As the shareholders recall: “Just two months on the job, which was meant to last almost 12 months, the Official Administrator unilaterally impaired almost the entire uniBank loan book, including government, quasi-government and BOG’s own receivables, all valued at almost GH¢1.0bn. Other attractive bank assets, including landed properties, were also impaired unilaterally.
“The Official Administrator also refused to consider the shareholders’ credible capitalisation proposal from a first-class international bank, which would have allowed the OA to comply with Section 115 of Act 930, and that would have spared the State from jeopardising the lives of thousands of Ghanaians and spending billions of cedis to contain the ripple effect of the withdrawal of the bank’s licence.”
The shareholders continue: “The truth that ought to be known by the Ghanaian public is that the Bank of Ghana relied on a Draft Report dated 13 July 2018 by KPMG/OA with several caveats to revoke uniBank’s banking licence. A true account of the situation exposes the deliberate steps, from the onset, by the Bank of Ghana, through its Banking Supervision Department and the OA, to weaken uniBank, ignore credible efforts by the shareholders to revive the bank, and ultimately withdraw its licence.”
At the start of KPMG’s “official administration” of uniBank, the BSD’s Acting Head, Osei Gyasi, met the uniBank management and made it clear that KPMG’s appointment was for an initial period of 6 months but could be extended for a further three months and yet another three months, making it 12 months in total.
Osei Gyasi again emphasized that uniBank was not under receivership, but KPMG had been appointed to assume all powers, functions and responsibilities of the shareholders, directors and key management of the Bank in accordance with Section 108 of Act 930 and, therefore, the central bank expected utmost cooperation with KPMG.
The BSD Acting Head also noted that in accordance with KPMG’s duties, it was to ensure that uniBank became financially viable and then put on a recapitalization phase with shareholders given the right of first option.
“It was disclosed at this meeting,” say uniBank shareholders, “that the bank’s solvency was negative GH¢551m, and this was due to the BSD’s monthly auditing and downgrading of the loan book, including the instant impairment of GH¢760.67m.
“As at 31 March 2018, uniBank customers’ deposits stood at GH¢4.28bn. By 31 July 2018, the customers’ deposits had declined to GH¢3.5bn. The reduction of about GH¢780m in four months was as a result of significant withdrawals by customers under the new KPMG management. The OA was unable to drive deposit mobilization which was critically needed for loans servicing.”
The shareholder went on: “Although the Bank of Ghana’s Emergency Liquidity Support for uniBank stood at GH¢2.2bn as at 30 March 2018, uniBank also had liquid assets amounting to GH¢1.75bn with the Bank of Ghana. These comprised of Treasury Bills of GH¢633.5m; US dollar deposit balance equivalent to GH¢1,779m, and Interim Payment Certificates (IPCs or government and quasi-government receivables) of GH¢936.6m.
“It is pertinent to note that by 31 July 2018, four months after the Official Administrator had assumed the management of the bank, uniBank’s solvency deteriorated from GH¢551m to negative GH¢1.45bn.
“Also, the Bank of Ghana’s liquidity support to uniBank had risen to GH¢3.14bn in just four months under the Official Administrator’s management, as compared to GH¢2.2bn reported on 20 March 2018 when KPMG took over. This registered an increase of GH¢927.2m in just four months. This huge increase was mainly due to the panic withdrawals by customers as a result of the management style.”
By April 2018, the total assets of the bank stood at GH¢8,747,835,609.58 compared to total liabilities of GH¢8,955,872, 957.69. Strangely, the very next month, KPMG effected what the uniBank management calls “inexplicable and unilateral impairments of the bank’s loan book and other assets”.
KPMG impaired GH¢3,082,005,927.55 on the loan book, and even downgraded all the government and quasi-government indebtedness to the bank, amounting to about GH¢1.0bn, some of which had been issued with Interim Payment Certificates (IPCs) by the government.
“Although IPCs qualify as collateral under Section 2.2.3 of BoG’s Guide for Financial Publications for Banks for the purpose of impairments or provisioning,” explains the uniBank management, “the Official Administrator ignored this and impaired the whole government and quasi-government receivables.
“Interestingly, after impairing all these receivables on 31 May 2018, KPMG yet wrote to the Ministry of Finance on 22 June 2018 requesting payment of the same receivables it had impaired on 31 May,” says uniBank’s management. “It is instructive to add that the response to KPMG’s letter to the Finance Ministry was received on 12 July 2018. Nineteen days later, on 1 August 2018, uniBank’s licence was withdrawn by the BoG, without the government and the Finance Ministry’s indebtedness having been paid. Even the BoG’s own indebtedness to uniBank had not been paid.”
On the same May 31, 2018, KPMG had also, without consultation or discussion with uniBank’s shareholders, impaired “other assets” of the bank amounting to GH¢3,708,861,242.98 on the basis that improper procedures had been employed in recording those transactions.
The head office of the Bank of Ghana in Accra.
UniBank shareholders were dumbfounded. “The Official Administrator did not base his decision on any acceptable guidelines set by any professional valuer,” they say. “Considering the nature of the items in the ‘other assets’ category, including quality landed properties and buildings in prime locations such as Ridge and the Airport Residential areas of Accra, and the fact that impairment is about recognising deterioration in a given asset value, the shareholders found it difficult to accept the situation in which prime properties whose values were rapidly appreciating could be completely impaired at the same time.
“Again, to strengthen the bank’s balance sheet, the shareholders provided assets valued at GH¢4.4bn with a forced sale value of about GH¢3.52bn to be liquidated or leveraged for injecting liquidity. Unfortunately, that was totally ignored by the Official Administrator in finalising the 31 May 2018 financial position of the bank.
“The Official Administrator took this arbitrary action in spite of the fact that Sections 2.2.3 and 2.2.4 of the Bank of Ghana’s Guide for Financial Publication for Banks allow the forced sale value of such assets to be treated as ‘assets held for sale’. The shareholders presented these assets on 10 April 2018 and continued to engage KPMG on the process of perfecting these assets to support the balance sheet. We were, therefore, surprised that KPMG ignored these assets without recourse to the shareholders simply on the basis that KPMG did not have sufficient time to do so.”
KPMG writes to Ministry
On June 22, 2018, almost one month after downgrading almost all the uniBank assets, including the government and quasi-government indebtedness, KPMG wrote to Finance Minister Ofori-Atta about uniBank’s “government and government-related receivables”.
Signed by Simon Dornoo for the KPMG Official Administrator, the letter said: “We wish to bring to your attention and request that you use your good offices to assist uniBank Ghana Limited receive overdue amounts from Government and Government-related entities.
“These receivables totaling GH¢868,973, 599.10 as at May 31, 2018 … are the repayment sources for various facilities granted by the bank. We will welcome the opportunity at your earliest convenience to discuss this matter and provide any additional information and/or clarification that you require.”
The letter tabulated the individual indebtedness of the government and government-related entities. Crucially, the reply did not come from Ken Ofori-Atta, it came from Deputy Finance Minister Charles Adu Boahen, who wrote back to KPMG on July 12, 2018, saying: “[The] Ministry of Finance appreciates your role as Official Administrator for uniBank. MoF is currently validating the numbers together with [the] Bank of Ghana and as soon as practicable, would revert with full details as requested.”
A day after receiving the Ministry of Finance’s reply, KPMG went on to declare uniBank insolvent. In a draft report dated July 13, 2018, titled, Financial Condition and Future Prospects of uniBank Ghana Limited – Updated, KMPG told the BoG that uniBank could not be rehabilitated. Following this recommendation, the BoG revoked uniBank’s license on August 1, 2018.
On the same day, the BoG turned KPMG into a Receiver for uniBank, an action which was against the law. On September 4, 2018, KPMG (the ex-official administrator now turned receiver), having excluded uniBank’s “other assets” from the balance sheet in the May 2018 returns, issued a writ in the Commercial Division of the High Court, asking that the “other assets” be now preserved for it as a Receiver.
According to uniBank shareholders: “The distasteful u-turn of the Official Administrator turned Receiver confirms the position of the shareholders that the central bank set in motion a grand scheme to run uniBank into insolvency, using all available unethical, crude and vile measures by either its own staff or other assigns.
“If not, why will an Official Administrator with the interest of the institution under administration at heart, refuse to recognise assets presented by the shareholders to help the bank’s position, but suddenly turn around to ask a court to ring-fence the same assets he had downgraded for him to appropriate to the same bank (now under receivership) after the bank’s licence had been revoked for reasons that would have been cured by the recognition of the rejected assets?”
It is quite instructive that under KPMG administration, uniBank’s total liabilities had increased to GH¢9,162,334.25 by May 2018, whilst its total assets had been reduced to GH¢2,101,512.45 from the April 2018 level of GH¢8,747,835.61. This was because GH¢6,646,323.16 had been impaired against the income surplus account.
As a result, the total shareholders’ funds deteriorated from negative GH¢208m by April 2018 to negative GH¢7.2bn by May 2018. In effect, the impairments had reduced the shareholders’ funds by almost GH¢7.2bn, a situation that rendered uniBank technically insolvent.
Nii Amanor Dodoo of KPMG, appointed Official Administrator and later Receiver for uniBank.
Say the uniBank shareholders: “From the above, it has become clear that Nii Amanor Dodoo, the Official Administrator of yesterday and now a Receiver, contravened Article 23 of Ghana’s 1992 Constitution, which imposes a duty on administrative bodies and officials to act fairly and reasonably and comply with the requirements imposed on them by law.
“Again, by unilaterally impairing the bank’s assets to the value of about GH¢6.7bn out of the total assets of about GH¢8.7bn and declaring the bank technically insolvent just two months on the job, which was to take a minimum period of six months, shows clearly that the Official Administrator acted recklessly, unreasonably and in bad faith.
“We also note other unreasonable acts of the Official Administrator, which were contrary to Articles 23 and 296 of Ghana’s Constitution, and which were designed to put uniBank out of business and wipe out the investments of shareholders.
“In a letter dated 2 March 2018, uniBank notified the Acting Head of the BSD that there were additional receivables attributable to the government backed by supporting documents, amounting to GH¢955,586, 421.39. No response had been provided to this letter at the time of the appointment of the OA.
“We hold the view that the technical insolvency of uniBank was caused by the OA’s unreasonable, unjustifiable, and unilateral impairment of the bank’s entire loan book and ‘other assets’, including even government and quasi-government and even BoG exposures to uniBank, and validated payment certificates issued to contractors by the Government of Ghana.
“Indeed, the OA acted unreasonably and in bad faith, and thereby went outside the powers it had under Act 930. This is evidenced by the OA’s rejection of the capital injection proposals presented by the uniBank shareholders.”
Credible rehabilitation proposals
To save uniBank from going under, the shareholders made the following commitments to KPMG to inject the needed capital into the bank with the view to achieving a well-capitalized and solvent bank:
l In a letter dated July 12, 2018, the shareholders informed KPMG that they were committing GH¢2.7bn and assets worth GH¢4.4bn (totaling GH¢7.1bn) into the bank to recapitalize it and make it solvent. In the same letter, the shareholders informed KPMG that they were engaging a first class international bank as a strategic partner of uniBank and that the strategic partner would play a major role in the future management of the bank, if the Bank of Ghana approves the arrangement.
l In the same July 12 letter, the shareholders informed KPMG that, as they had stated in an earlier letter to the KPMG on April 10, 2018, “the Belstar Consortium still maintains its commitment to off-load all its shares in ADB Bank and invest the proceeds into uniBank. This would bring in additional funds of about GH¢700m”.
“Indeed, these were credible rehabilitation prospects, which were proposed to the Official Administrator on 12 July, 2018,” uniBank shareholders recall. “It is on the record that this letter from the shareholders was received and acknowledged on the same day we sent it. Regrettably, the shareholders never received any response from the OA.
“Also, in the press release of 20 March 2018 by the BoG Governor, Dr. Addison, appointing KPMG as OA, he stated that he was acting under Sections 107 and 108 of Act 930, and specifically recited the authority of the OA under Section 108 ‘to exercise a variety of powers to rehabilitate and return the bank to regulatory compliance within a period of six months, at the end of which the bank will be returned to private ownership and management’. The OA, however, acted contrary to the above. The OA declined to accept the credible rehabilitation plan of the shareholders, which would have had a positive effect on the capital and balance sheet of uniBank.”
Remarkably, just a day after the shareholders had submitted their resuscitation plan, KPMG, without any feedback either in the form of discussion or a written reply to the shareholders, sent its “draft report” on uniBank to the Bank of Ghana upon which the BoG withdrew uniBank’s license.
According to uniBank’s shareholders, the draft report, which had “many caveats”, did not comply with Section 115 of Act 930, which gives the existing shareholders the first option to increase their capital through the issuance of new shares.
The shareholders say: “It is difficult to understand why the OA went outside the powers it had under Act 930 and declared the bank technically insolvent when the shareholders had submitted a proposal to inject the required capital into the bank so as to comply with Section 115 of Act 930.”
The documents in the hands of Africawatch show that at the request of the shareholders, a meeting was held on July 30, 2018 at the premises of KPMG. The shareholders expressed deep concern about what they called “the unreasonable and unlawful” downgrading of uniBank’s assets by KPMG, especially the indebtedness of the government and government-related institutions.
The shareholders reiterated their readiness to inject further capital into the bank as had been previously communicated to KPMG. They also expressed frustration for not being given the opportunity to provide any additional capital to shore up the bank. To the shareholders, no lawful basis existed for the denial of the opportunity to inject more capital to save the bank.
At this meeting, the shareholders presented to KPMG an offer letter of US$400m from a first-class international bank to be injected into uniBank in two tranches of US$200m each. But KPMG disregarded this offer.
So uniBank died
On the same July 30, 2018, the Bank of Ghana met KPMG and representatives of uniBank’s shareholders at the central bank, during which the shareholders expressed concern about certain aspects of uniBank’s May/June 2018 financial report, which they considered to be grossly inappropriate and worrying.
BoG’s first Deputy Governor, who chaired the meeting, advised the shareholders to forward their concerns in writing to the central bank. The next day, the shareholders submitted their letter containing their concerns to KPMG, with copies to the BoG’s Deputy Governors. Both KPMG and the Deputy Governors acknowledged receipt in the morning of August 1, 2018.
In the letter, the shareholders drew attention to the lack of justification for the impairments of uniBank’s assets by KPMG, particularly the government-related receivables.
The shareholders maintain that if their commitments to inject further capital of about GH¢7.1bn had been allowed by KPMG, uniBank could have been saved, and would have prevented the disarray that the livelihoods of thousands of Ghanaians have been thrown into. Also, the use of Ghanaian taxpayer resources to fund the gap between uniBank’s assets and liabilities would not have arisen.
In the afternoon of August 1, 2018, while the shareholders were anxiously waiting to receive an official response to their letter, they instead got the shock of their lives from the media, announcing that the Bank of Ghana had revoked uniBank’s license, together with four other banks, and that the central bank had appointed Nii Amanor Dodoo of KPMG as the Receiver for uniBank.
The Bank of Ghana’s press statement also announced that the government had established a new indigenous bank, Consolidated Bank Ghana Limited (CBG), and that the BoG had appointed a receiver in respect of the assets and liabilities of the five banks, in addition to consolidating the good assets and liabilities of the banks in CBG with immediate effect.
On the same day, the BoG granted a universal banking license to the CBG, which was said to be 100% owned by the Government of Ghana.
On the very same day, August 1, 2018, the CBG was incorporated and the good assets and liabilities of the five banks were transferred to it. But CBG did not receive its certificate to commerce business until August 2, 2018, which means that all those transactions conducted by CBG prior to August 2 were in clear violation of Section 27 of the Companies Act, 1963 (Act 179) and are thus deemed illegal by Ghana’s business laws. Which raises the burning question that if you are part of the government, does that mean you are then above the law? No individual or company can openly break a country’s laws, so how is it the CBG could openly do that here?
Finance Minister Ken Ofori-Atta (right) and Information Minister Kojo Oppong Nkrumah at a press conference in Accra. Ofori Atta has much to answer for regarding uniBank’s collapse.
Interestingly, in supporting the BoG action, Finance Minister Ofori-Atta issued a press statement confirming that the government had taken note of the measures announced by the BoG to consolidate the five banks, “as part of the effort by the government to restore confidence and trust in our banking system”.
The Ministry of Finance also confirmed the capitalization of the CBG as GH¢450m, and that the CBG will be supported by a GH¢5.76bn bond issuance to purchase the good assets and liabilities of the 5 banks.
By the end of the day, it had become clear that, contrary to the BoG’s own indication that uniBank would be returned to private ownership and management in six months’ time, the central bank had rather sought to transfer uniBank’s “good assets and liabilities” to the CBG as quickly as possible.
This decision, according to the BoG, was based on the recommendation made by KPMG, now the receiver, to the effect that uniBank was beyond rehabilitation, meaning its liabilities far exceeded its assets.
In all this, the BoG refused to make public that, despite the monthly auditing and downgrading of uniBank’s loan book, and the subsequent registering of over GH¢1.3bn capital deficit which forced the CAR to negative 24.02% at the end of December 2017, the bank’s total assets as of April 30, 2018 still stood at GH¢8.75bn against total liabilities of GH¢8.96bn.
“The truth of the matter,” say uniBank shareholders, “was that, with the income surplus account at negative GH¢208m at the end of April 2018, KPMG believed that uniBank shareholders had the capacity to recapitalise the bank and restore it to regulatory compliance. However, since this was not going to help them to achieve their pre-determined objective of collapsing the bank at all cost, they decided to act recklessly and unprofessionally at the end of May 2018.”
A campaign to destroy
Immediately as the government announced the establishment of the CBG, the media and the general public began to discuss the contents of a “report” which was purported to be the Official Administrator’s report on the financial condition and future prospects of uniBank. Strangely, uniBank and its shareholders had not been given a copy of this report. Consequently, on August 3, 2018, the shareholders wrote to the BoG asking for a copy of the KPMG report for their study.
The BoG waited for ten days before replying on August 13, declining the shareholders’ request and saying it was “unable at this time to make available to you a copy of the Official Administrator’s Report on the bank”. Incredibly, no reason was offered for this refusal.
“We found it regrettable and unacceptable for the BoG to deny shareholders access to the OA Report even as the contents were being widely disseminated to discredit uniBank and instigate public contempt and opprobrium against the bank, especially when no opportunity had been provided to the shareholders to respond to any purported finding by the OA,” uniBank shareholders said.
“A very disturbing aspect of the KPMG/OA’s report was information given to the media and the general public that uniBank’s shareholders had granted themselves huge loans and advances. On 20 August, the shareholders wrote to Nii Amanor Dodoo and KPMG requesting for supporting schedules and all relevant documentation that would enable them [the shareholders] to independently verify, validate and confirm balances reported by KPMG. Unfortunately, such supporting schedules and relevant documentation are yet to be received by the shareholders.”
On August 31, an entire month after the contents of the AO’s Report had been discussed by the media to discredit the uniBank shareholders, the BoG finally sent an official copy to the shareholders, informing them that “the Official Administrator has now finalised the report and investigations have commenced. We can therefore now make a copy of the report available to you”.
The implication of this is that the report used to revoke uniBank’s license on August 1, 2018 was only a draft report. This is proved by the cover letter dated July 13, 2018, that the Official Administrator attached to the Report. It clearly stated: “This Report has been prepared primarily from information and data extracted and verified to the extent possible from the financial records and other relevant information maintained by the bank, pursuant to the scope of work agreed in our engagement letter dated 20 March 2018.
“The Report has also been prepared from the Bank’s documents reviewed by us as well as information obtained from interviews conducted with relevant stakeholders.
“Our work was limited to the requirements of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) Section 114(5) and we have not carried out procedures that would constitute an audit in accordance with International Standards on Auditing.
“As stated in our engagement letter, unless otherwise stated in our Report, we have not sought to verify information contained herein or performed procedures necessary to enable us to express an audit opinion on any of the financial or non-financial information contained in this Report. Accordingly, we cannot and do not express an audit (or similar) opinion on the information contained in this Report.
“We have not obtained formal confirmations from employees of the Bank that they have made available to us all significant information relevant to our Report which they have knowledge of. Accordingly, we are unable to determine the extent to which information and explanations provided to us are complete and accurate and the Report should be read in that context.
“Please note that our work does not include a full assessment of matters of legal interpretation and regulatory compliance. We, therefore, recommend that you refer these matters to your legal advisors for more detailed evaluation and advice, if needed. [Signed by Nii Amanor Dodoo, for KPMG Official Administrator].”
Lies told to IMF
Two years after their bank was unjustifiably liquidated, the uniBank shareholders are still quite upset by what they call “the deliberate misinformation that has been fed to the IMF on the circumstances that led to the collapse of the bank” by the Ministry of Finance and the BoG. “This has obviously denied the Ghanaian public, the international community and respected institutions such as the International Monetary Fund (IMF), and the World Bank Group of unbiased but valuable information to arrive at informed conclusions on the central bank’s action,” say the shareholders.
According to them, the misinformation has led to the IMF making statements about uniBank that contain “grave inaccuracies”. Specifically, they point to the following IMF statement included in its March 7, 2019, report on Ghana: “…Onsite inspections conducted by the BoG in late 2017 and early 2018 highlighted further under-provisioning in some institutions – among others resulting in the appointment of an official administrator at uniBank (one of Ghana’s largest banks). By early July, it had become clear that prudential reports for uniBank were largely inaccurate and that the bank had, in fact, become deeply insolvent. Given the absence of credible rehabilitation prospects, the BoG decided to resolve the bank in August 2018…”
The shareholders say the above statement did not give an accurate account of how the central bank conducted its supervisory functions in respect of uniBank between July 2017 and August 1, 2018, when the bank’s license was revoked.
“Sadly, yet expectedly, the BoG’s biased view on uniBank became the narrative in the public space and that view subsequently formed the basis of statements and conclusions by reputable persons and institutions on the bank,” the shareholders explain.
“As much as the shareholders share the view that the implementation of the roadmap met some challenges, they are deeply worried about how the BoG unfairly misrepresented uniBank to the IMF, which ultimately formed the basis of the unsubstantiated comments by the Fund.
“The shareholders hold the position, and strongly so, that the steps taken by the BoG during the roadmap implementation exercise were meant to run the bank into insolvency to help achieve an agenda to collapse it. For the avoidance of doubt, the shareholders state again that their bank, as at 31 July 2017, had CAR of 10.7%, total paid up capital of GH¢422.10m, and total equity of GH¢500m. This was the position after the AQR update was completed and shareholders injected the required capital. UniBank was therefore SOLVENT as at 31 July 2017,” a point the shareholders want to make very clear.
July 2017 was only seven months after President Akufo-Addo’s government took office. Thirteen months later, uniBank was dead and buried. This terrible tale shows what the poisonous effects of dirty politics can do if it is allowed to become the dominant factor that determines the survival or extinction of banks in the country.
This is poignantly illustrated in how little the government needed to capitalize the Consolidated Bank of Ghana (CBG): A mere GH¢450m, according to the BOG. Yet the government, quasi-government entities, the Ministry of Finance and the Bank of Ghana itself owed uniBank nearly GH¢1 billion, which, had it been paid by the government and its other entities under the normal course of lawful governance, would surely have allowed uniBank to survive. In fact, uniBank would then have had twice as much capital as CBG on the day that the new bank was incorporated.
But Finance Minister Ofori-Atta let dirty politics rule his thinking, and no matter what entreaties the uniBank shareholders and management made to him to pay up the government’s indebtedness to the bank, he did not do it and thus allowed uniBank to go under.
The multimillion-dollar question begging for an answer is: Why would the government not pay off its indebtedness to uniBank when it was that same government, acting now through the Ministry of Finance and the Bank of Ghana, that used the alleged insolvency of uniBank to collapse the bank? Of course there is no answer that will be acceptable or honest, just as sure as the fact that any nation run in this way will not have a prosperous future.