The majority shareholder of the now-defunct Global Access Savings and Loans company, Dr Kofi Amoah, has wondered why Ghana did not follow in the footsteps of the United States of America, the citadel of capitalism, which saw the need to save its troubled banks and insurance companies in 2008, but rather chose the path of killing local financial institutions.
Global Access Savings and Loans was among 23 savings and loans companies as well as finance houses whose licences were recently revoked by the Bank of Ghana over insolvency claims.
According to the central bank, Global Access Savings and Loans Company Limited, which was incorporated under the laws of Ghana in 1998 and commenced business in February 2000 as a Partner Agent of ADB in the Western Union Money Transfer Business, grew and added other money transfer services to its remittance product line.
Following the changing needs of customers, the management, according to BoG, decided to convert the company into a Savings and Loans Company.
“The company was granted a savings and loans company licence on 15th June 2009 by the Bank of Ghana and it commenced operations on December 6, 2010”, the central bank said, adding: “The institution has been insolvent since 2016 with serious liquidity challenges”.
“The reported capital adequacy ratio and net worth are both negative. The Bank of Ghana has had several engagements with the Board and Senior Management on the need to inject additional capital but have not yielded any fruitful results.
The institution, according to the Bank of Ghana, “rather opted to apply for liquidity support from the Bank of Ghana which was declined due to its insolvency position”.
The specific issues that led to the revocation of its licence, the BoG said, included the following:
“a. The institution’s Net worth of negative GH¢58.19 million as at end May 2019 indicates that its paid-up capital is impaired in violation of Section 28(1) Act 930.
b. The institution’s capital adequacy ratio of negative 195.06% as at end May 2019 is in violation of Section 29(2) of Act 930.
c. The institution has breached the statutory cash reserve ratio requirement since 2016.
d. The institution assumed the liability of a loan contracted by the majority shareholder amounting GH¢2.91 million. The loan amount was injected into the institution as equity capital. The liability was however concealed as a suspense account in the books of Global Access Savings and Loans Limited.
e. The institution continues to record accumulated losses due mainly to high rent expenses paid to the majority shareholder for the use of its premises.
f. The institution failed to keep accounting records in a manner that gives an accurate and reliable account of its transactions constitutes unsafe and unsound banking practice.
g. The institution failed to implement Bank of Ghana’s on-site examinations findings conducted in October 2018.
h. There have been several complaints from customers about the inability of the Institution to honour depositors’ withdrawals.
i. The company neither published nor submitted its 2017 Audited Financial Statements to the Bank of Ghana contrary to Act 930″.
However, Dr Amoah told Paul Adom-Otchere’s Good Evening Ghana programme recently that the central bank could have saved the genuinely distressed financial institutions instead of annihilating them in the manner it did.
He made the following argument:
“When in 2008 because of troubles with mortgage bad securities in the United States, it created a contagion of the collapse of financial institutions around the world. The citadel of capitalism – you’ll think that, hey, if you’re a bank, you run into trouble you’ll go out of business. … But the Americans said: ‘No, we can’t do that’. They understand the economic structure of their society, they understand the critical importance of banks, and that: yes, the bank made a mistake but we cannot let it die. Do you understand? So, Hank Paulson, who was the [Treasury Secretary] at the time, went to Congress to ask for USD750 billion to rescue US banks and insurance companies. Bush, the Republican President, was the one who supported that, a Democratic Congress voted for it. They put politics aside.
“Everybody understood [that]: ‘If our banks collapse, we are dead’. They voted for the USD 750 billion. What was the money supposed to be used for? They called it TARB: Troubled Assets Reform Programme. So, they used part of this money, to go into the troubled banks, the big institutions, Goldman Sachs… huge ones, they went in there, and they bought the toxic assets, the challenged loans and all of that. Then – this is the government doing that – they bought shares in those companies. Then they sat on the Boards of those companies. The money they gave them was not free; they had interest.
“All those companies, as you and I sit here, all the loans that they gave them have been paid, they are stronger banks now, they saved one million high-paid jobs in the US, they saved the auto industry; it’s one of the critical parts of the US economy, because if the banks went down, the auto industry would also go down.
“So, the point I’m making is: yes, we came to a point where we see that, OK, in Ghana, our financial institutions are troubled, in some cases where it was pure malfeasance, there’s nothing we can do, people are stealing; I’ll never support that. But in cases where you see that, OK, they made some mistakes, but here is an institution that has been in business for 10, 15 years, they have some managerial capacity here; not that had, they have thousands of customers, they have a lot of branches with a lot of employees, when you sack one person, the multiplier effect of that persons salary is then wiped out. Because he can no longer go and buy bread from the baker, he cannot go and buy meat from the butcher, he cannot go and buy potatoes, he cannot go and buy this, so all these things spark a downward spiral that begins to bring your economy down.
“The banking system in Ghana should be protected, should be sacred, and it must be structured to fit with the policy set and directives of what the development programme is supposed to be. And, therefore, I’m not here to say that Bank of Ghana didn’t do … but if you were asking me, I’d do what I can to save those indigenous Ghanaian banks that could be save. We could have saved the jobs that we had, and all of that. How many of these people are in the streets? Thousands now”.
In his opinion, Global Access “could have been saved”, “and, therefore, to be “micromanaging and this and that and all of that, and kill some of these institutions” was unfortunate.