Banking sector clean up: Heritage Bank had suspicious capital, did not meet new minimum capital requirement – Financial Analyst

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A Financial Analyst , Mr Johnson Amoah has said that the Bank of Ghana (BoG) had solid reasons for revoking the license of Heritage Bank and others during the clean up exercise undertaken by the central bank.

He explained that the BoG gave enough reasons for the actions taken against the bank.

“I have read reports that the BoG was ordered to collapse Heritage Bank. People are raising issues against the decision by the Bank of Ghana but in my view, the Bank of Ghana had enough reason to collapse the bank.

“The reasons were clearly given by the Bank of Ghana and I believe they make sense,” portions of his write up said.

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The regulator came under section 16 (1) (a) (7) and (8) of Act 930, the Bank of Ghana may revoke a licence and appoint a receiver under section 123 of the Act where it is satisfied that an applicant provided false, misleading or inaccurate information in connection with the application for a licence or suppressed material information, and may in cases of emergency, or in the public interest revoke the licence of the bank without notice, to revoke the licence of Heritage Bank.

Further, sections 9 and 12 of Act 930 authorise the Bank of Ghana to revoke a licence if it considers that significant shareholders of a bank are not suitable.

The grounds for revocation of the licence are as follows:  The bank’s capital appears to have come from sources which are suspicious. In the application for a banking licence, each shareholder of Heritage needed to demonstrate their “ability to subscribe to the shares” of the bank. The Bank of Ghana is not satisfied that the original sources of the bank’s capital are acceptable, in terms of section 9 (d) of the Banks and SDI Act, 2016 (Act 930) and section 1 of the Anti-Money Laundering Act of 2008 (Act 749) which requires acceptable capital to be obtained from lawful and transparent sources. Specifically:

The promoters of Heritage provided evidence to Bank of Ghana at the time of the application for a banking licence to the effect that an amount totaling GHC120.6 million was lodged with a local bank. The amount of GHC120 million was transferred to the bank from Agricult (a company wholly owned by Seidu Agongo, a promoter of Heritage) which funds appear to have been derived from contracts awarded to Mr. Agongo by COCOBOD and are currently the basis of criminal prosecution in the High Court of Ghana.

While Mr. Agongo claimed that his sources of capital for the bank included proceeds of a USD 19.25m contract with COCOBOD, Bank of Ghana’s subsequent investigations have shown that there was no such contract between COCOBOD and Mr. Adongo. One or more contracts executed however existed between COCOBOD and Sarago Limited (“Sarago”). Documents submitted to the Bank of Ghana for licensing of the bank made no mention of the contract between COCOBOD and Sarago nor the fact that Sarago (also a shareholder of the bank) was owned by Mr. Agongo.

From its 2017 audited financial statements, an amount of GHc15.8m was transferred to the bank from an unnamed investor which was attributed to unpaid called-up share capital, calling into question whether the minimum capital of the bank had been fully paid up at the time of licensing. From the same financial statements, an operating loss was booked resulting in a shortfall of GHC 20.6 m in the bank’s capitalization. This was expected to be repaid by an unnamed shareholder through a transfer of fixed assets (branches) to the bank. Despite attempts by the Bank of Ghana to confirm (i) the identity of the unnamed shareholder, (ii) the basis of valuation of the fixed assets, and (ii) whether the terms of the transactions were at arms’ length, and otherwise acceptable, the bank and its shareholders, directors, and management have failed to clarify matters.

His comments come at a time Chief Executive Officer of the defunct UT Bank , Mr Prince Kofi Amoabeng has said the BoG was ordered to collapse the bank.

Mr Amoabeng is reported to have said on Accra-based CTV on Tuesday, October 4 that “I was pained by the collapse of Heritage Bank because it was young.”

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