Government, Central Bank officials meet over BHC, Co-operative Bank closure

Customers, staff of liquidated banks disappointed

Rural bank fails to declare dividend

Accra (Greater Accra), 18^th January 2000

The government and Central Bank officials are on Monday having intensive discussions on the future of the Bank for Housing and Construction (BHC) and Co-operative Bank, which have been liquidated following heavy losses, official sources said.

The government has, meanwhile, approved a scheme to protect depositors of the two banks.

Bank of Ghana and Ministry of Finance sources told the Ghana News Agency (GNA) in Accra that the Governor and government are holding discussions on the matter.

"We need to sort a few matters out before coming out with a statement," a Bank of Ghana source said.

The government on Monday closed down the two banks and ordered all customers and staff except Branch managers and Accountants to stay away.

Under the scheme to protect depositors, they will be required to submit their rights to claims to the government and in exchange have their deposit balances transferred to the Agricultural Development Bank or Ghana Commercial Bank Limited (GCB).

A notice to depositors dated January 17, 2000 posted at the national headquarters of the Co-operative Bank explained that the bank had been liquidated because of "consistent losses resulting from deterioration of their loan portfolio."

It said the liabilities of the bank exceed its assets and this has affected its ability to satisfy the capital adequacy and minimum capital required under the banking law.

The notice said a special shareholders resolution meeting has been held to endorse the liquidation and this is in line with the Act 180 (1963) adding that the bank is now an insolvent and ceased operations with immediate effect.

Industry experts told the GNA that the most important thing now is how depositors would get back their money.

The two banks had been weighed down heavily by the A-Life Supermarket scandal in which the owner fleeced several banks of some 120 billion cedis.

A customer of BHC said he was shocked when he learnt of the closure of the bank on Monday morning.

"I was shocked...I was supposed to pay some money to my partners today (Monday) and I don't know what to do now."

The financial sector was rocked a few years ago when "Miracle Banks" such as Pyram and R5 emerged promising fantastic interest rates crashed.

The Central Bank ordered their closure and they eventually collapsed bringing down with them thousands of depositors, who had lodged billions of cedis with them. Nothing has happened to their owners.

The Bank for Credit and Commerce also collapsed and foreign currency depositors are yet to be paid all their deposits.

The Social Security and National Insurance Trust (SSNIT) bailed out Meridien BIAO, when it went bankrupt. The bank is now called The Trust Bank.

GRi

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Hundreds of customers and staff of the Co-operative Bank and Bank for Housing and Construction (BHC), who went to the banks on Monday morning were disappointed when they found their doors locked.

Frustrated staffs were seen engaged in conversation while customers openly expressed their anger at the action. They criticised the management of the two banks and the government for not giving prior notice about the closure of the banks.

The government on Monday ordered the closure of the two banks and asked all customers and staff, except Branch Managers and Accountants to stay away.

Red flags were hanging in front of the Foreign Branch of BHC at Adabraka. A red flag at Co-operative Bank had the inscription "Demirifa duie" (condolences).

The premises of the two banks were peaceful with personnel from the Police Striking Force and private security organisation on guard duties. A police officer at the foreign branch of BHC in Adabraka told the Ghana News Agency (GNA) that customers, who came to the bank were turned back.

He said a customer who is to travel abroad on Monday broke down and shed tears on seeing that the bank had been closed down.

Senior Bank officials, including their Managing Directors, were not available for comments.

A staff member of the Cooperative bank blamed their predicament on the A-Life crises in which billions of cedis were siphoned from the bank by one supermarket chain operator.

A probe into the matter led to the sacking of some senior personnel of the Ghana Commercial Bank, Bank for Housing and Cooperative bank, but not all the monies have been retrieved and the case is bogged down in the courts for over two years now.

Some believe some government officials could be implicated in the case and that has led to the foot-dragging in getting to the bottom of the matter.

Central Bank and Price Waterhouse Coopers officials told the said that they were at BHC headquarters to work but gave no details.

But as at 1100 hours, they were still sitting outside, waiting for the security personnel to open the doors for them.

The government and Central Bank officials are having serious discussions on the Future of the two banks, which have been liquidated following heavy losses, official sources said.

The government has, meanwhile, approved a scheme to protect depositors of the two banks.

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The Ada Rural Bank could not declare any dividend for the 1998 financial year because it was left with only 2.5 million cedis after meeting financial commitments from its profit of 21.1 million cedis for the year.

The bank transferred over 5.2 million cedis to statutory reserves leaving an income surplus of 15.8 million cedis out of which 13.2 million cedis was paid as total dividends for 1997 at three cedis per share.

At its Annual General Meeting (AGM) for 1998 held at Big Ada on Saturday, the Shareholders said they were not impressed with the bank's performance and therefore suspended approval of new allowances for members of the Board of Directors.

The Shareholders raised queries about delays in calling meetings and Nene Osram Gaduga the fourth, the Board chairman, apologised saying it was due to unforeseen circumstances.

Nene Gaduga said during the period under review, the bank's investment in government papers increased by 15 percent from 609 million cedis in 1997 to 700 million cedis while loans rose from 163 million cedis to 302 million cedis.

Total deposits grew from 665 million cedis in 1997 to 838 million cedis in 1998 representing an increase of 26 percent. Its assets increased by 14 percent from one billion to 1.14 billion cedis

Nene Gaduga was not happy that a greater part of the bank's income came from investments since this does not help the economy in the bank's catchment area.

He expressed concern about poor repayment of loans saying out of a 435 million cedis given to customers only 116 million cedis was recovered.

The board was therefore left with no other option than to continue to channel a greater percentage of its funds into government papers.

Nene Gaduga however assured the shareholders that the 1999 financial year was quite successful and that the bank hopes to pay good dividends at its next meeting.

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