UniBank Shareholders took GHS5.3 billion of the bank’s assets – BoG

The Governor of the Bank of Ghana, Dr Ernest Addison, has said uniBank’s shareholders and its related companies took GHS5.3 billion of the bank’s assets “without due process and in breach of relevant provisions of Act 930”.

Announcing the consolidation of uniBank, The Royal Bank, The Beige Bank, Sovereign Bank and The Construction Bank, at a press conference on Wednesday, 1 August 2018, Dr Addison said uniBank was beyond salvaging.

“uniBank and Royal Bank were identified during the AQR update in 2016 exercise to be significantly undercapitalised. The two banks subsequently submitted capital restoration plans to the Bank of Ghana. These plans however, yielded no success in returning the banks to solvency and compliance with prudential requirements.

“The Official Administrator appointed for uniBank in March 2018 has found that the bank is beyond rehabilitation. Shareholders, related and connected parties had taken amounts totaling GH¢3.7 billion which were neither granted through the normal credit delivery process nor reported as part of the bank’s loan portfolio.

“In addition, amounts totaling GH¢1.6 billion had been granted to shareholders, related and connected parties in the form of loans and advances without due process and in breach of relevant provisions of Act 930.

“Altogether, shareholders, related and connected parties of uniBank had taken out an amount of GH¢5.3 billion from the bank, constituting 75 percent of total assets of the bank”, he said.

Background

It would be recalled that on 20th March 2018, the Bank of Ghana appointed KPMG as Official Administrator (OA) for uniBank to help ascertain the true financial condition of the bank, protect depositors’ funds held by the bank, and explore how the bank could be returned to viability within a period of no later than six months.

In line with the requirements of Act 930, KPMG submitted an Inventory of Assets and Liabilities of uniBank (Ghana) Limited on 20th April 2018 (30-day report), and a report on the Financial Conditions and Future Prospects of uniBank (Ghana) Limited on 20th June 2018 (90-day report).

KPMG’s reports confirmed, based on a detailed review and validation of the financial condition of uniBank that the bank was balance sheet insolvent at the time of their appointment as official administrator and remains so.

As official administrator, KPMG made efforts to ascertain the assets and liabilities of the bank and evaluated options for turning around the bank’s fortunes. KPMG, however, found that the bank’s operations are not sustainable.

Among other things, the bank’s interest income and other sources of income are insufficient to cover the associated cost of funds of underlying borrowings and liabilities, as well as overheads of about GH¢0.31 billion per annum.

A significant portion of the bank’s loan book which forms the largest component of the bank’s assets, is non-performing. The earning capacity of the bank continues to deteriorate.

In addition, the bank’s governance and internal control environments have been assessed as weak, with significant deficiencies in credit underwriting and loan approval process, compliance and reporting.

According to the Bank of Ghana Key findings from KPMG’s reports indicated serious corporate governance, risk management, compliance and management flaws, as well as unlawful transactions involving shareholders, related parties, and connected parties.