Johan Rheeder, MD/CEO of Sovereign Bank
Investigations by the Central Bank have revealed that promoters of Sovereign Bank, one of five banks, which have now been merged into Consolidated Bank, did not pay for the shares they acquired in the bank.
According to the Central Bank, the promoters of the bank have surrendered their shares to the bank, while the directors, representing the original shareholders, have resigned.
William Ato Essien, founder of the defunct Capital Bank, was the largest shareholder in Sovereign Bank while Dr Kwame Achampong-Kyei, Executive Chairman of GLICO, was the board chairman of Sovereign Bank.
The Central Bank said that Sovereign Bank, which acquired its universal banking licence in January 2016 and began operations in April 2016, encountered some problems which led the Central Bank to appoint an advisor to advise its management with a view to improving the affairs of the bank in April 2018.
However, instead of an improvement, it recorded a further deterioration in the capital of the bank due to its inability to recover the investments placed with financial institutions, as well as impairments to its loan book.
Its capital adequacy ratio has dropped to negative 11 currently.
At a press conference on Wednesday in Accra, Central Bank Governor, Dr Ernest Addison explained: “As part of Bank of Ghana’s investigations into the failure of Capital Bank Limited (currently in receivership), it emerged that Sovereign Bank’s initial capital contributed by its shareholders was funded from transfers from Capital Bank which had been presented to the Bank of Ghana as investments on behalf of the bank. Subsequent to its licensing, a substantial amount of the bank’s capital was placed with another financial institution as an investment for the bank. The bank has, however, not been able to retrieve this amount from the investment firm with which it was placed, and it has emerged that the investments were liquidated by the shareholders and parties related to them.”
The Bank of Ghana said that Sovereign Bank was insolvent, and that there was no reasonable prospect of a return to viability.
“The bank is unable to meet daily obligations as they fall due. Liquidity support granted so far to the bank amounts to GH¢12 million as of May 2018.
“The bank has not been able to publish its audited accounts for end December, 2017 breaching Section 90 (2) of Act 930. The bank’s current situation has resulted in persistent breaches of key regulatory requirements and prudential limits.”
By Samuel Boadi
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