It is emerging that the GCB Bank Limited was prevailed upon to absorb the performing assets of the now insolvent UT Bank and Capital Bank in a manner that will help minimise the impact of their insolvency on the entire banking sector, maintain their indigenous status and prevent job losses.
The GCB Bank was chosen over two other bidders, including the HFC Bank, after its bid met the Bank of Ghana (BoG) and the government’s takeover criteria — the ability to maintain the indigenous status of the banks, keep branch networks and, by extension, absorb the existing staff.
Although smelling of arm-twisting, the decision to opt for the GCB over the others in the forcible takeover of the two failed banks could represent a defining moment for the GCB.
If properly managed, it could set the stage for the bank to potentially realise its long-held goal of dominating the financial services space.
After losing the top spot to Ecobank Ghana in 2012, the GCB Bank now occupies the number two position, in spite of being the leader in terms of branch network.
With assets in excess of GH¢6 billion, equity of GH¢1.1 billion and cash and cash equivalents of GH¢1.2 billion (as of December 2016), the bank stood in a better position to absorb the two banks and its successful consummation will create an enlarged bank, with assets well in excess of GH¢7 billion.
The new bank could also have about 200 branch networks and 2,800 employees on its payroll, a development that automatically invokes better supervision by management..
This created an efficiency challenge that the GCB Bank would have to rise up to, an economist with the Institute for Fiscal Studies (IFS) told the GRAPHIC BUSINESS on August 14.
“The GCB is now inheriting assets that it can leverage and liabilities that it must manage. It means that its fortunes can now impact the economy, given its size,” he said.
He was optimistic that a seamless consummation of the deal could feed into the bigger economy, resulting in multiplier effects for the private sector.
Grounds for takeover
The forcible takeover followed the inability of the two banks to meet regulatory requirements on capital position, which prompted the BoG to place them under care and maintenance for almost two years.
While they were under life support, attempts to resuscitate the two lenders failed, with each of their over 20 restructuring and capital restoration plans being rejected by the BoG as being incredible.
That prompted the BoG to fall on the Banks and SDI Act, 2016 (Act 930), which provides that under-capitalised banks be given 180 days to correct their capital position.
The Governor of the BoG, Dr Ernest Addison, said at a press conference that the UT Bank and the Capital Bank were heavily deficient in capital and liquidity and their continuous operation could have “jeopardised not only their depositors’ funds but also posed a threat to the stability of the financial system”.
To help contain that potential contagious, he said, the BoG decided to revoke their licences and approve a purchase and assumption (P&A) transaction that allowed “the GCB Bank, a large bank with the right balance sheet, to take over all deposits and selected assets of the UT Bank and the Capital Bank”.
“The acquisition of selected assets and deposit liabilities of the UT Bank and the Capital Bank by the GCB Bank is part of the efforts by the GCB Bank to further broaden its reach and grow its balance sheet to support a fast growing economy,” Dr Addison said.
It was also in line with the BoG’s broad objective to position the financial sector to support the government’s transformational agenda, he added.
Source: Daily Graphic
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