We wanted BoG to waive interest on GHC610m liquidity support – Ato Essien
Founder of defunct Capital Bank William Ato Essien has complained about the Bank of Ghana’s high handedness in dealing with the bank’s troubles leading to eventual revocation of their license in 2017.
Mr. Essien commenting on circumstances leading to the bank losing its license 2 years ago said the bank was in distress when it reached out to the central bank for liquidity support.
Speaking on Good Evening Ghana on Accra-based Metro-TV, Mr. Essien said the central bank which was the lender of last resort had granted liquidity support to the struggling bank to the tune of about GHS610 million in different tranches.
The liquidity support, he stated, came at a cost of about 25.5 percent interest per annum and much as the bank was servicing the facility, it made a passionate plea to the Bank of Ghana to write off the interest for Capital Bank to only pay the principal minus interest.
“Capital Bank owed the central bank about GH¢610 million with the Bank of Ghana from liquidity support we took in 2016. We were paying interest of about GH¢14 million every month. As at August 2017, we had made interest payment of GH¢254 million to the central bank.”
“…We told the central bank to interest forgive us. Because if they had interest forgave us, the GH¢14 million we were paying as interest every month would be GH¢188 million in a year and that would have gone straight into our income,” he said.
According to Mr. Essien, when it became apparent that the bank could no longer service the loan from the central bank it made a proposal to the Bank of Ghana to convert the GH¢610 million liquidity support into an equity and “own” the bank “so no one loses their job”.
He argues that would have been a plausible and cost-efficient way of handling the bank’s troubles rather spending billions of cedis at the expense of taxpayers.
Capital Bank’s troubles
Mr. Essien’s Capital Bank was among the first casualty in the banking reforms undertaken by the central bank. The bank and UT Bank were taken over by GCB Bank on August 2017 in a purchase and assumption transaction.
GCB took over the good assets of the two banks while the Bank of Ghana appointed a receiver to ensure the realization of other assets for the purpose of paying debtors among others.
The governor noted that “UT Bank and Capital Bank were heavily deficient in capital and liquidity and their continuous operation could have jeopardized not only their depositors’ funds, but also posed a threat to the stability of the financial system.”
“It, therefore, became necessary for the Bank of Ghana to revoke their licenses and approve a Purchase and Assumption (P&A) transaction to allow GCB Bank, a large bank with the right balance sheet, to take over all deposits and selected assets of UT Bank and Capital Bank.”