Govt loans of GH¢150m to collapsed Royal Bank – Shareholders

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The shareholders of the defunct Royal Bank have reacted to the collapse of the bank and said there was “absolutely no need for the Central Bank ...

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The shareholders of the defunct Royal Bank have reacted to the collapse of the bank and said there was “absolutely no need for the Central Bank to have added Royal Bank to the Consolidated Bank.

Finance Minister – Ken Ofori Atta

“All that the bank required was for the Central Bank and Ministry of Finance to give a GH¢300million dispensation for it to carry out its capitalization plans,” the shareholders stated in a statement released on Wednesday, August 15.

“If Government related loans (GH¢150m) had been paid timely and there had not been a run of the bank fuelled by the continuous speculation that the local banks were not ‘strong’, TRB [The Royal Bank] would have worked itself out of the situation they found themselves in,” the shareholders said.

“It is worth noting that TRB recovered in excess of GH¢100m from the bad loans last year and were on course to do the same this year.

With the loans going to the receiver, it is highly unlikely the receiver will recover even half of the amount stated as most debtors will deem the debt as government debt so will not be in a hurry to pay back and this will be to the detriment of The Royal Bank Shareholder,” the statement said.

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Management wrote 2 letters to the Central Bank about capitalising the buildings. There was no official response from the Central Bank.

Management then went ahead to pay stamp duties in registering additional shares due to the increased capitalization. Again, this was communicated to the Central Bank.

After receiving the letter about the registration of the additional shares, the Central Bank finally responded by stating that the buildings cannot be used as capital. The bank then requested for additional time to enable them sell the buildings.

The Central Bank asked the bank to quickly monetise the buildings used for capitalization.

Minimum Capital Requirement

In September 2017, the Central Bank announced an increase in the MCR to GHS400m. The Shareholders of The Royal Bank decided to look for equity partners or merge with another bank in order to meet the MCR.

Run on the Bank

In February this year, the Central Bank announced they had appointed an advisor at both UniBank and Sovereign Bank.

This caused another wave of cash withdrawals from the bank and subsequently, the bank had to fall on the Central Bank for further support in the form of ‘Clearing’ support.

The Central bank supported the bank with GH¢120m in ‘Clearing’ support. So the total support from the Central Bank was GH¢270m.

Capitalization Plans

The bank appointed Serengeti Capital as transaction advisors. The bank also engaged PWC to conduct Due Diligence on itself so as to prepare the bank for Investors and/or a merger with another bank.

After PWCs due diligence on the bank, it emerged that the bank had to provide additional GH¢291m in addition to GH¢164m that had already been impaired by the auditors Deloitte. To make the bank attractive for investors, it was proposed by Serengeti Capital that rather than impair the book further, the bank should seek dispensation from the Central Bank to write off the additional impairment over a period of time whilst the bank recover the bad loans.

The bank submitted credible capitalization plans to the Central Bank. The plan included recapitalization of the bank by Oakwood Green Holdings led by Gabriel Edgar and Daniel Addo.

They were backed by Emerging Capital Partners (ECP). ECP were prepared to put GHS400m into the bank provided the Central Bank were not going to withdraw the GH¢300m (liquidity and clearing support) as soon as the injected the capital.

Oakwood Green introduced ECP to the Deputy Governors of the Central Bank to demonstrate how keen they were on TRB.

Omni Bank were also keen to merge with TRB so the plan was a merger with Omni Bank and ‘new’ money from Oakwood Green.

Asset Quality Review –BoG

In April this year, BoG undertook another asset quality review on the bank. There was no exit interview with management after their exercise and the report of their findings were never shared with anyone at the bank.

Collapse of TRB

According to the Central Bank, TRB was collapsed on 3 main issues:

  • High Non-Performing Loans
    • Mis-Reporting to the Central Bank
    • Shareholder Transactions- GH¢161m

High NPL

The NPLs of TRB was high due to non-payment of Government related contracts and the unfortunate situation with the Finatrade Group. These 2 items alone accounted for half of the reported NPL’s. The Finatrade debt was across most banks in the industry.

Mis-Reporting

TRB never mis-reported to the Central Bank. The issue of mis-reporting can only be attributed to the fact that the Central Bank may have deducted all the capital injection that the shareholders of TRB gave to the bank. If the capital was deducted, then TRBs ratios will be found to be in default.

Nonetheless, these were legitimate capital injections that the bank sought approvals from the Central Bank but never got response from.

Shareholder Transactions

The amount that was stated by the Central Bank is NOT accurate. The Shareholders do not know how that figure was arrived at. All shareholder transactions with the bank were done at arm’s length. The amount in the audited accounts totalled GH¢49m and that included related parties. All these transactions were approved by the Board of TRB.

Conclusion

Conclusion

All that TRB required was for the Central Bank /Ministry of Finance to give a GHS300m dispensation for TRB to carry out its capitalization plans.

 

There was absolutely no need for the Central Bank to add TRB to the Consolidated Banks.

If Government related loans (GH¢150m) had been paid timely and there had not been a run of the bank fuelled by the continuous speculation that the local banks were not ‘strong’, TRB would have worked itself out of the situation they found themselves in.

It is worth noting that TRB recovered in excess of GHS100m from the bad loans last year and were on course to do the same this year.

With the loans going to the receiver, it is highly unlikely the receiver will recover even half of the amount stated as most debtors will deem the debt as government debt so will not be in a hurry to pay back and this will be to the detriment of The Royal Bank Shareholder

Source Daily Graphic/Ifejghana

 

 

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