‘Ken Ofori-Atta & Keli Gadzekpo expressed interest in buying Capital Bank before it collapsed’-Founder
Founder of defunct Capital Bank, Ato Essien, has broken his silence on the collapse of his bank.
In a yet to be telecast interview with Paul Adom Otchere on Metro TV, the founder of the bank rubbished claims that he ”chopped” the money at Capital Bank.
Ato Essien said he felt bad when he was insulted for something he never did.
According to him, he gave birth to the bank and managed it from a non-regulatory institution to a regulated bank.
He said he got amazed at how narratives could be twisted to make him look bad.
He disclosed to the host he has sued the Bank of Ghana because his property needs to be protected.
He also revealed on the show contrary to claims that the bank was insolvent, the Finance Minister Ken Ofori-Atta and Keli Gadzekpo, the current CEO of Enterprise Group expressed interest in buying the bank in 2016.
”If the bank was that bad, the current Finance Minister Ken Ofori-Atta together Keli Gadzekpo were in my office” to tell me there were interested in buying the bank.
”If it were that stressful, would they have done that?”
The Bank of Ghana (BoG) in 2017 revoked the License of Capital Bank.
Consequently, the BoG approved a Purchase and Assumption (P&A) transaction with GCB Bank Ltd. that transferred all deposits and selected assets Capital Bank Ltd to GCB Bank Ltd.
According to the central bank, the decision was ‘’…due to significant capital deficiencies, the underlying reason was poor corporate governance practices within these institutions. In this instance, we saw the dominant role of shareholders who exerted undue influence on management of the banks, leading to poor lending practices. This was also reinforced by weak risk management systems and poor oversight responsibility by the boards of directors. Some of the examples of recklessness that led to the failure of the two banks include:
• Co-mingling of the banks’ activities with their related holding companies. For instance, one bank was paying royalties for the brand name, even at the time that the bank’s financial performance was abysmal and could not pay dividends. Interestingly, the royalties were approved by four out of seven members of the board without the consent of the other significant minority shareholders, including an International Financial Institution. As a result, the international institution placed a notice on its website abrogating all relationships with the bank, and this led to most of the foreign lenders cutting off their credit lines to the bank and recalling their credits; thereby creating serious liquidity squeeze to the bank.
• Also, very high executive compensation schemes were being operated by the affected banks which were not commensurate with their operations. The risk and earnings profile of the banks could not support the compensation schemes.
• Non-executive directors of the banks compromised their independence and fiduciary duties to serve as checks on executive directors. This was because rewards such as business class air tickets were being granted to them annually.
• Interference by non-executive directors in the day-to-day administration of the banks weakened the management oversight function of executive directors. Some non-executive directors were also acting as consultants to the same banks with no clear mandate, which gave rise to conflict of interest situations.
• Non-adherence to credit management principles and procedures as the banks were heavily exposed to insiders and related parties. There was also no evidence of interest payments on these investments. The investments were, therefore, impaired, but some members of the board at the time accepted the responsibility to pay off the said amount through a board resolution.
• Diversion of funds to holding companies and their related parties was widespread. In the case of one bank, placements could not be traced to the bank’s records though some customers showed proof of their investments with the bank.
• Irregular board meeting also accounted for the weaknesses in the board oversight.
• In all of these cases, one thing was clear, and that is, the banks could not delineate themselves from their past practices as finance houses. They followed the same practice of borrowing from high net worth persons at very high costs, without any plans to bring themselves in line with the industry norm.