BOG says it has reservations about
worker-management of BHC
Rural Banks urged to tighten security at premises
Accra (Greater Accra) 26 June 2000
The Central Bank says it has reservations about a worker-management buyout proposal by the collapsed Bank for Housing and Construction (BHC). However, any such proposal should be appraised on its merit in line with laid-down procedures.
The workers and management intend to use their severance packages to acquire some assets of the bank, which was liquidated last year together with the Cooperative Bank.
In a written answer to a questionnaire submitted by Ghana News Agency, the Central Bank said it is yet to identify one successful worker-management take-over in the country stressing that "this points to a high risk proposal."
It said the liquidated BHC "has been defamed and starting with the same faces again would make funds mobilisation difficult." Adding: "The new owners will start all over again like a new bank without depositors."
The Bank of Ghana said the offer for the selected assets would compete with other parties also interested in the assets.
"In fact the Liquidator will want to maximise the value of the assets for the benefit of creditors of the liquidated banks. The highest bidder is likely to acquire the assets."
The Bank of Ghana said there are no more banks in the system that have liquidation staring them in the face adding that it will continue to carry out its monitoring function more vigorously.
"The liquidation of the two banks has sent a strong message to the banking community that banks could be liquidated when they become insolvent.
"The staff of banks will have to be vigilant to prevent or expose wrong-doing in their banks."
The Bank of Ghana said it is not responsible for the collapse of the two banks. "Management of banks are responsible for setting up appropriate internal control systems that would make fraud and other irregularities difficult or impossible."
It said the Central bank, through its supervisory wings, monitors these controls to ensure that they are effective.
However, where staff collude to circumvent laid-down procedures and controls, then the system is rendered vulnerable and fraud could be perpetrated.
"In the case of BHC, staff including executives, were implicated in the A-Life scandal and dismissed for their complicity."
BOG said its banking Supervision Department, which is responsible for monitoring banks, is adequately equipped and staffed with well-trained personnel.
It said it uses two methods of supervision of banks - on-site and off-site. The off-site approach involves the request by BOG for submission of various types of reports referred to as "prudential returns" by the banks.
These are analysed in the office and serve as an early warning mechanism. "However, if figures are doctored, warning signs are difficult to detect."
With the on-side methodology, BOG staff visits the banks once a year during which they review controls and asset risk.
"Our procedures are not necessarily designed to detect fraud at all costs but they are intended to facilitate detection of fraud.
"Review meetings are also held with managements of banks to discuss all aspects of their operations."
The Central bank said managements of the banks have the primary responsibility to ensure that controls are working.
Referring specifically to the role of the A-Life scandal on the collapse of the two banks, the Bank of Ghana said the amounts were large enough to worsen their already weak positions.
"Ghana Commercial Bank was also involved in the A-Life scandal. However, it has sufficient reserves to absorb the resultant shock."
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Abokobi (Greater Accra) 26 June 2000
The Bank of Ghana (BOG) has reiterated that rural and community banks that show signs of collapse will no more be protected by the Central Bank.
In a statement read for him at the Annual General Meeting (AGM) of the Abokobi Area Rural Bank (AARB) on Saturday, Mr. Emmanuel Asiedu-Mante, Head of the Banking Supervision Department of the BOG, said "the BOG is using this forum to caution that any rural or community bank, which for any reason, shows signs of collapse, will, unlike the past, not be protected in any way by the BOG but will be allowed to fail".
It is incumbent on the BOG by the dictates of the banking law to either take over or manage any rural or community bank, which shows sign of collapse or appoint an appropriate organisation to do so on its behalf.
Currently, 22 out of 132 rural banks in the country have been closed down mainly due to financial misappropriation, mismanagement.
An unspecified number of the remaining 111 rural banks have been identified to be showing major signs of collapse.
Mr. Asiedu-Mante said the BOG has since the inception of the rural and community bank concept been very instrumental and committed in ensuring the development and efficient operation of such banks.
This, he said, is to transform the rural subsistence economy into sustained medium-scale enterprises capable of improving the living conditions of the rural dweller.
"It is sad to observe that, despite the efforts of the BOG to strengthen the operations of rural and community banks at great financial cost, the conduct of some of directors, staff and shareholders alike have caused some of the these banks to fold up while a few more have shown signs of collapse."
He said the BOG has, by constant supervision through its off-site monitoring and on-site examination, been able to detect early warning signals and dealt with them to avert any impending danger.
Mr. Asiedu-Mante, however, noted that unless directors and staff of rural and community banks commit themselves to improving the internal control systems, all efforts by the BOG to ensure efficient operation might amount to nothing.
He, therefore, called on the director to be wary of managers who fail to take their annual vacation "as this has resulted in several fraudulent practices in some banks".
Mr. Asiedu-Mante praised the board, management, staff and shareholders of the AARB for their impressive performance in the last financial year, and pledged the BOG's support for rural and community banks that contribute to the development of their catchment areas.
Mr. Robert A. Boi-Doku, Chairman of the board of directors of the AARB, said the bank made a profit of over 54 million cedis last year, which is 78.8 per cent higher than that of 1998, which stood at 30.2 million cedis.
He attributed the increase in profit to prudent investments by the bank and keen supervision by the BOG and the Association of Rural Banks (ARB), adding that, but for serious malpractices, which the bank experienced in 1999, the profit margin would have been higher.
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Awutu-Beraku (Central Region) 26 June 2000
An executive member of the Association of Rural Banks, Mr Emanuel K. Obeng, has urged directors of rural and community banks to tighten the security system at their premises.
Mr Obeng, who was addressing the 12th Annual General Meeting of the Awutu Emasa Rural Bank at Awutu-Beraku on Saturday, also asked shareholders to be watchdogs for their banks.
He said reported cases of attacks on rural banks enjoined management directors and shareholders to take precautionary measures to protect their banks.
Mr Obeng urged rural banks to appoint competent staff and directors to enable them to withstand the growing competition in the banking industry.
Nai Quaye Larbi, Abranhene of Awutu Traditional Area, called on rural banks to review upward the rate of their shareholdings, saying the 100 cedis at which some of the banks sell their shares is woefully inadequate and valueless.
Mr George P. Abbey Quaye, a shareholder, appealed to directors of rural banks to refrain from using shareholders' dividends to strengthen their financial base because the practice discourages people from buying shares.
In a report, Mr James Eric Nkrumah, former MP for Awutu-Senya and Chairman of the bank's Board of Directors, said the bank made a profit of 84,774,000 cedis in 1999 as against 89,591,000 cedis in 1998.
He attributed the shortfall to changes in government monetary policies, particularly treasury bill rates. Mr Nkrumah said the bank gave out 795 million cedis in financial assistance to its customers in 1999 as against 427 million cedis for the previous year.
Mr Paul Obeng, Manager of the bank, said it had embarked on an exercise to recover overdue loans and appealed to customers to pay back their loans promptly to avoid embarrassment.
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Accra (Greater Accra) 26 June 2000
The Ghana Stock Exchange (GSE) continued its unimpressive run on Monday with major market indices unchanged when trading resumed on the bourse.
The All-Share Index, which gained 0.26 points on the strength of a 10-cedi gain by Accra Brewery Limited (ABL) on Friday to end a spate of poor trading sessions, stood still at 816.71 points.
There was no price gain as the market continued to be dominated by bearish sentiments. Only ABL out of the 23 listed equities registered a positive pressure. There was negative pressure on 15 equities while seven others returned no pressures.
The market capitalisation and the change for the year to date were unchanged at 3,564.37 billion cedis and 10.94 per cent respectively. Generally, the market remains offer-driven with offers outstripping bids.
Volumes traded on the bourse slipped from 18,300 on Friday to 10,100. Eight equities traded shares as compared with five equities on Friday.
Offers were up marginally at 2.2 million from 2.1 million. Bids, however, closed lower at 93,500 against 107,900 on Friday. A total of 81,900 bids out of the 93,500 were in ABL. It, however, traded no shares.
Below are the closing prices of listed equities in cedis:
ABL 540
AGC 18,600
ALW 2,600
BAT 440
CFAO 38
EIC 1,880
FML 1,200
GBL 1,400
GCB 978
GGL 990
HFC 910
MGL 200
MLC 150
MOGL 17,500
PAF 300
PBC 520
PZ 800
SCB 22,000
SPPC 150
SSB 1,990
UNIL 1,849
UTCE 125
CMLT 422
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