Ken Ofori-Atta, Governor Ernest Addison Saddle State With Judgment Debt For Duffuor’s UniCredit
The Court of Appeal, has overturned the Bank of Ghana’s decision to revoke the license of UniCredit Savings and Loans Ghana Limited, describing the Central Bank’s decision as an unlawful exercise of its powers some four years ago.
Finance Minister, Ken Ofori-Atta, BoG Governor, Ernest Addison and others, have at various times defended the revocation of the licenses, including that of UniCredit owned by Dr Kwabena Duffour, the ex-Minister of Finance and Governor of the BoG.
The three-member Court, with Justice Gbiel Suurbaare as President, was unanimous yesterday in its decision to quash the BoG’s revocation of UniCredit’s license.
The other members of the Panel are; Justices Merley Afua Wood and Janapare Bartel.
Their decision opens up the state for huge judgment debt which could, include the hijacking of its capital, the profit UniCredit would have made, if it was in operation in the last four years, rents on its offices and other assets and perhaps the salaries of its workers who were laid off.
The Central Bank, on Friday, August 16, 2019, revoked the licences of 23 insolvent savings and loans companies and finance houses, including uniCredit, pursuant to Section 123 (1) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930). This provision requires the Bank of Ghana to revoke the licence of a Bank or Specialised Deposit-Taking Institution (SDI) where the BoG determines that the institution is insolvent.
However, Hoda Holdings Limited, Mother Company of UniCredit, in a writ filed on Monday, August 19, 2019, sought an interlocutory injunction against the BoG from interfering with its operations pending arbitration.
Subsequently, in 2020, the High Court (Human Rights Division) presided over by Her Ladyship Gifty Adjei Addo, dismissed a Judicial Review application filed by HODA Holding against BoG, following the revocation of the operating license.
Dissatisfied with the ruling, HODA Holdings, proceeded to the Court of Appeal to challenge the High Court Judgment.
This ends the legal gymnastics by Frank Davies, lawyer for the Bank of Ghana. It is unclear, if others will also head to the court just like HODA Holdings.
HODA Holdings, had been persistent in its resolve that the government and the BoG, unlawfully terminated its operation.
On May 20, 2020, the Human Rights Division of the Accra High Court presided over by Justice Gifty Agyei Addo, dismissed an application by the BoG, seeking to halt proceedings in a case initiated against it by HODA Holdings.
The Central Bank, was challenging the decision of another High Court that dismissed their claim earlier, that the High Court lacked jurisdiction to hear the action instituted by HODA Holdings.
In the ruling of the High Court, it said the application is dismissed, because the applicant (BoG) has not demonstrated the irreparable damage it will suffer, should the respondent (applicant) HODA Holdings succeed.
The dismissal of this application, has now paved the way for the hearing of the substantive case filed by HODA Holdings to commence at the High Court on July 23, 2020.
It would be recalled that, in October last year, the High Court dismissed an application by lawyer of the BoG, Frank Davies, seeking to strike out a case filed by UniCredit challenging the revocation of its license.
The High Court in its ruling, indicated that its jurisdiction has been properly invoked in the matter and subsequently ordered the BoG, to file a response to the application brought by the owners of Unicredit Savings and loans.
The Court also awarded a cost of GH¢3000 against the Bank of Ghana, to be paid to Unicredit savings and loans and another GH¢2000.00.
The Bank of Ghana, being dissatisfied with the ruling of the High Court, proceeded upstairs to the Court of Appeal to quash the High Court ruling, because the central bank believed the matter should have been handled at an arbitration level before proceeding to court.
HODA Holdings Limited in August 2019 sued Dr Ernest Addison and the Bank of Ghana for revoking the license of the company.
In the company’s affidavit filed at the Human Rights Division of the High Court, Hoda Holdings said its funds of over GHS 54 million were locked up with Unibank, before it was forced to cease operations by the central bank in 2018, and it has since been trying to retrieve it.
Hoda Holdings wants “An Order of Certiorari directed at the 1st and 2nd Respondents to bring up to this Honourable Court for the purpose of being Quashed the Notice Dated the 15th day of August 2019 declaring Unicredit Ghana Limited insolvent and revoking the license of Unicredit Ghana Limited to operate as a Specialized Deposit-taking Institution.
An Order of Interlocutory Injunction restraining the Respondents, their agents, assigns, privies hirelings or otherwise howsoever described from interfering with the Operations of Unicredit Ghana Limited and to refer the Subject matter of the Instant Application to Arbitration.”
The Akufo-Addo government, declared it was in full support of the decision taken by the BoG to close down about 23 financial institutions.
It said, it was to clean up the messy financial sector. Speaking in a News conference in Accra, the Information Minister, disclosed that they were in full support of the decision since these companies are insolvent.
He added that it is a move to protect the deposits of over one million Ghanaians, who have their deposits in these financial institutions.
“If you have institutions that are insolvent and all they are doing is that they going for emergency liquidity assistance from the central bank to be keeping the institutions running and paying salaries It does not mean the institution is solvent and sustainable.”
“This is how to resolve these matters, this is how to protect the deposits of over one million Ghanaians” he stressed.
The Bank of Ghana, also appointed Mr Eric Nipah as a Receiver for the specified institutions in line with section 123 (2) of Act 930.
The revocation of the licences of these institutions, has become necessary because they are insolvent even after a reasonable period within which the Bank of Ghana has engaged with them in the hope that they would be recapitalized by their shareholders to return them to solvency.
It is the Bank of Ghana’s assessment that these institutions, have no reasonable prospects of recovery, and that their continued existence poses severe risks to the stability of the financial system and to the interests of their depositors.
In line with the Government’s commitment to protect depositors’ funds, the Government, has made funds available to enable the Receiver to pay depositors after their claims are validated.
It said the Receiver was to make an announcement with regards to when and where payments will be made.
It was also to indicate documents required from depositors to facilitate the validation of claims and orderly payment of validated deposits.
Other creditors of the failed institutions, were be settled by the Receiver upon validation of their claims and to the extent that the Receiver will be able to realise value from the remaining assets of these institutions.
The Bank of Ghana, also with effect revoked the licences of two non-bank financial institutions, namely Express Funds International Ltd (remittance company) and Ghana Leasing Company Ltd (leasing company) which are insolvent and have been inactive for a number of years.
This action is pursuant to Section 7 of the Non-Bank Financial Institutions Act, 2008 (Act 774), which mandates the Bank of Ghana to revoke the licence of a non-bank financial institution licensed under that Act if that institution among other things ceases to carry on business.
The Bank of Ghana notified the Registrar of Companies of the revocation of these two licences and has requested that the Registrar commences winding-up proceedings against these companies under the Bodies Corporate (Official Liquidations) Act, 1963 (Act 180). Background 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:
a. 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;
b. Excessive risk-taking without the required risk management function to manage risk exposures;
c. 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;
d. Corporate governance weaknesses with weak Board oversight, poor accountability, and override of internal controls; e. Creative accounting practices and under-provisioning for impaired assets, thereby misrepresenting their true financial condition to the Bank of Ghana and other stakeholders; and f. 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 sub-sector through the orderly resolution of the failed institutions in accordance with Sections 123 to 137 of Act 930.
The Bank of Ghana, has with effect from today, completed the clean-up of the banking, specialized deposit-taking (SDI), and non-bank financial institutions (NBFI) sectors which began in August 2017. This follows the revocation of the licences of nine (9) universal banks, 347 microfinance companies (of which 155 had already ceased operations), 39 micro credit companies/money lenders (10 of which had already ceased operations), 15 savings and loans companies, eight (8) finance house companies, and two (2) non-bank financial institutions that had already ceased operations.
The Bank of Ghana is committed to ensuring that the banking, SDI, and NBFI sectors remain resilient, inclusive, and supportive of Ghana’s economic growth trajectory. To ensure that the remaining institutions remain resilient going forward, the Bank of Ghana will remain vigilant, intensify on-site examinations and enforcement actions including the application of sanctions for non-compliance with statutory, prudential and other requirements, and ensure that early warning signs of distress are mitigated by regulated institutions expeditiously. The Bank of Ghana will also work with ARB Apex Bank to reposition the rural and community banking sector, to enable them to better support rural economic development. Furthermore, the Bank of Ghana and the Government of Ghana will also launch the commencement of operations of the Ghana Deposit Protection Scheme in September 2019 to further strengthen protection of depositors’ interests.
