Two banks crash! Customers panic over takeover.

Two troubled financial institutions, UT Bank and Capital Bank, were yesterday compulsorily taken over by GCB Bank following the revocation of their licences by the Bank of Ghana (BoG).

The two banks are said to be financially insolvent – putting customers’ investments at great risk – and the Bank of Ghana (BoG) was compelled to intervene.

The acquisition was in line with Section 123 of the Banking Act, 2016 (Act 930), which grants the Central Bank the authority to revoke the licence of any bank that is deemed to be in financial distress.

The unannounced action, which was carried out to prevent mass withdrawal by depositors, caused fear and panic among customers, with the BoG assuring that there was no cause for alarm and that their investments are safe.

Immediately the announcement was made, the two banks were rebranded with GCB logo at both the Airport and Spintex Road headquarters.

The workers of the banks were initially prevented from accessing their offices; not until around midday when stocks had been taken that customers were attended to.

Vice President Mahamudu Bawumia last year dropped the hint of a possible collapse of some local banks owing to insolvency, saying that some eight banks were distressed and were at the point of liquidation.

According to Dr Ernest Addison, Governor of the Central Bank, UT and Capital Banks were grossly insolvent, which meant their liabilities exceeded their assets, putting them in a position where they were unable to meet their obligations as and when they were due.


He said the BoG would investigate and sanction officials whose activities led to the collapse the two financial institutions.

“The last phase of the BoG’s action would involve a thorough investigation of operations of UT Bank and Capital Bank and appropriate action taken against shareholders, directors and key management personnel who are found to be culpable,” Dr. Addison told journalists yesterday.

He said despite repeated agreements between the Bank of Ghana and the two distressed banks to implement an action plan to address such significant shortfalls, the owners and managers of UT Bank and Capital Bank were unable to increase the capital base of the banks to address the insolvency.

With the approval of the Purchase and Assumption transaction by the Central Bank, all deposits and selected “good” assets of UT Bank Limited and Capital Bank Limited, have been transferred to GCB Bank Limited, including all its branches.

Other Assets

The remaining assets and liabilities of the two distressed banks are expected to be settled and realized respectively through a receivership arrangement to be undertaken by global auditing firm, Pricewaters Coopers (PwC), which is the receiver in this transaction.

The banks – both of which are indigenous – attained commercial banking status after several years of operating as micro finance institutions.

Failure To Reverse Insolvency

They were given a 90-day ultimatum by the Central Bank to achieve at least 5 percent minimum capital requirement and 180 days for meeting 10 percent capital requirement, after their levels of insolvency had reportedly registered negative 100 percent.

Again, Dr Addison said the two collapsed banks were required to submit capital restructuring plans to the Central Bank, after they were listed among seven other banks said by BoG to be below the GH¢60 million minimum capital requirement.


According to him, all depositors of UT Bank and Capital Bank would have access to their cash or deposit accounts, and would be able to access their accounts and all their normal banking transactions at the GCB Bank branches nationwide.

“GCB will take over all the depositors’ funds and will continue to provide normal banking services to customers. Depositors of these two banks will now become customers of GCB Bank,” the Central Bank maintained.

Restructuring Exercise

The move is part of efforts to restructure the country’s banking industry.

As the Governor had earlier indicated, the Ghana Economic Forum held recently was meant for the country’s economy to be restored onto the path of prosperity, and so a strong banking sector is required.

Bawumia Vindicated

Vice President Dr Mahamadu Bawumia has been vindicated for dropping the hint during a lecture last year on “The State of the Ghanaian Economy – A Foundation of Concrete or Straw,” that some eight banks in Ghana risked collapse due to the continuous hikes of bad loans on their books.

“The asset quality review of banks, conducted in 2015, shows significant vulnerability of banks to current economic conditions and that if the affected banks were to fully make provision for all the bad loans, a significant number of them will collapse.

“In fact, eight banks were identified to exhibit significant weaknesses with capital adequacy ratios of below 10 percent and some below 5 percent and nearing collapse so it is a real problem.”

UT Listing Suspended

Meanwhile, the Ghana Stock Exchange (GSE) has suspended the listing status of UT Bank Limited with effect from Monday, August 14, 2017

According to a statement issued by GSE, the decision was taken following the failure of the UT Bank to publish its financial results since the end of its financial year – December 31, 2015.

“The non-publication is in breach of the continuing listing obligations under the GSE Listing Rules,” the statement read, adding that “The suspension has also become necessary due to the revocation of the licence of UT Bank by BoG.”

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