GN Bank Siphoned $62m - BoG

The clean-up of the banking, specialized deposit-taking (SDT) and non-bank financial institutions (NBFI) sectors in the country by the Bank of Ghana (BoG) is  opening the Pandora’s box with regard to how some of the owners illegally transferred customers’ savings and investments without traces.

The Central Bank last Friday struck once again when it announced a revocation of the licenses of some 23 insolvent savings and loans and finance house companies including GN Savings and Loans Ltd which is one of the many companies belonging to businessman, entrepreneur and politician, Dr. Papa Kwesi Nduom.

Massive Transfers

According to the Central Bank’s report, GN Savings and Loans transferred $62 million and another 718,000 Pounds Sterling to its sister company in the US without the knowledge of BoG and the Ministry of Finance.

The Central Bank said GN Bank was in breach of section 19 of the Foreign Exchange Act 2006, Act 723, Section IV of Bank of Ghana Notice No. BG/GOV/SEC/2007/4, and subsequent Bank of Ghana notices issued in August 2014 prohibiting such practices.

The BoG, in its release last week, announcing the closures of the said financial institutions, indicated that the financial condition of the GN Savings and Loans Limited has deteriorated since its reclassification from GN Bank in 2018, with both negative capital adequacy ratio and negative net worth.

It added that GN Savings and Loans Capital Adequacy Ratio (CAR) was -61% in breach of the minimum required of 13%.

Severe Liquidity

The BoG revealed that GN Savings and Loans was also facing a severe liquidity crisis with numerous complaints received by the Financial Stability Department of the BoG from aggrieved customers who have been unable to access their deposits with the institution for the past several months.

“What is more, it has consistently failed to meet the minimum cash reserve requirement of 10% of its total deposits, since the end of the first quarter of 2019,” it said.

Debt and Illegal Transfer

According to the Central Bank, while GN has indicated that government owes it a total amount of GH¢942.98 million of which GH¢102.73 million represented Interim Payment Certificates (IPCs), the BoG’s assessment is that IPCs totalling GH¢30.33 million only have been confirmed by the Ministry of Finance as of 6th August 2019 as owed to contractors that may be indebted to affiliates of GN.

The BoG’s supervisory assessment shows that even when the total outstanding IPCs amount of GH¢30.33 million was considered, it still did not address GN’s capital deficit of -GH¢683.66 million, the Central Bank said.

“It must be noted that GN’s insolvency problems are largely attributable to overdraft and other facilities it extended to its related parties who are other companies in the Groupe Nduom network of businesses under circumstances that violated relevant prudential norms,” the BoG report said.

It said of particular interest are the funds totalling GH¢761.55 million that GN Bank, as it then was, placed with its sister companies – Ghana Growth Fund (Gold Coast Advisors) and Gold Coast Fund Management Limited (now Blackshield Capital Management) – both licensed by the Securities and Exchange Commission.

According to BoG, some of these funds were used by the two related parties to pay their customers whose investments with them had matured, while some were also used to fund road and other contractors, who claim to have worked on government projects.

Violation of Prudential Norms

The BoG cited violation prudential norm by GN Savings and Loans, saying “they reflect transactions entered into by Ghana Growth Fund or Gold Coast Fund Management with these contractors using funds taken from GN under circumstances that violated prudential norms. The failure of the two related parties to pay back these funds to GN affected GN’s capital position, leading eventually to its insolvency and acute liquidity challenges.”

Nduom’s Facebook Rebuttal

Dr. Nduom has since rebutted the claims and described the BoG’s statement as “either gross negligence on the part of the BoG, or an egregious misrepresentation of the truth designed to drag our name in the mud.”

He said in his Facebook post that “the information about International Business Solutions is false. International Business Solutions has two main business lines – Management Consulting and Import/Export. All of the funds mentioned are comprised of payments of invoices for goods and services that were rendered in Ghana.

“To use it as justification for any regulatory action is either gross negligence on the part of the BoG, or an egregious misrepresentation of the truth designed to drag our name in the mud.

“The BoG has all the documents for every pesewa transferred out of Ghana and there was absolutely nothing wrong with engaging in an international business. The real scandal is the GHS 2.2 Billion Cedi portfolio that the Ministry of Finance has held hostage for over two years.

“Their refusal to acknowledge and pay these debts is what they are using to destroy a strong Ghanaian company,” he said.

More Companies

Apart from Dr. Nduom’s GN Savings and Loans Ltd., prominent companies like Ideal Finance Ltd., IFS Financial Services Ltd., Legacy Capital Savings and Loans Ltd., Midland Savings and Loans Company Ltd., Sterling Financial Services Ltd., uniCredit Savings and Loans Ltd., Women’s World Banking Savings and Loans Co. Ltd., Accent Financial Services Ltd. and Adom Savings and Loans Ltd have their linces revoked.

Others are All Time Finance Ltd., Alpha Capital Savings and Loans Ltd., ASN Financial Services Ltd., CDH Savings and Loans Ltd., Commerz Savings and Loans Ltd., Crest Finance House Ltd., Dream Finance Company Ltd., Express Savings and Loans Company Ltd., the First African Savings and Loans Company Ltd., First Allied Savings and Loans Co. Ltd., First Ghana Savings and Loans Co. Ltd., First Trust Savings and Loans Ltd. and Global Access Savings and Loans Company Ltd.

The BoG has said the actions were taken pursuant to Section 123 (1) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930) and subsequently appointed Eric Nipah as a Receiver for the specified institutions in line with section 123 (2) of Act 930.

Payments Assured

In line with the government’s commitment to protect depositors’ funds, BoG said government had made funds available to enable the Receiver pay depositors after their claims are validated.

“The Receiver will in due course make an announcement with regard 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.

BoG had carried out a similar exercise in 2017 and 2018, targeting seven commercial banks whose mismanagement cost the taxpayer about GH¢12 billion.

Source: Daily Guide