Appearing before the Public Accounts Committee on Wednesday, he said the BoG is collaborating with the relevant state agencies to ensure that justice is served although they did not have control in the judicial process.
“In terms of the processes, we wish that it could have been faster. But I think that we are working on it. We are supporting the Attorney-General’s Department with some materials to help them prosecute shareholders and directors that are culpable,” he said.
The BoG has since the banking sector clean-up revoked the licences of 9 universal banks, 347 microfinance companies, 39 microcredit companies, 15 savings and loans companies, eight finance house companies, and two non-bank institutions.
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:
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 specialised deposit-taking institutions, given the risks they posed to their depositors and other counterparties to whom they were exposed directly or indirectly; Excessive risk-taking without the required risk management function to manage risk exposures;
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; Corporate governance weaknesses with weak Board oversight, poor accountability, and override of internal controls;
Creative accounting practices and under-provisioning for impaired assets, thereby misrepresenting their true financial condition to the Bank of Ghana and other stakeholders; and 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.
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.
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