ACCRA, Aug. 14 (Xinhua) -- Ghana's central bank announced here early Monday it had revoked the operating licenses of two local commercial banks, the UT Bank, a publicly listed bank, and the Capital Bank.
Its decision, according to a press release, is due to the extreme insolvency of the two banks which are not able to meet their obligations to customers.
"UT Bank and Capital Bank were deeply insolvent, meaning that their liabilities exceeded their assets, putting them in a position not to be able to meet their obligations as and when they fell due," the statement read.
Despite repeated agreements between the Bank of Ghana (BoG) and UT Bank and Capital Bank to implement an action plan to address these significant shortfalls, the statement noted that the owners and managers of UT Bank and Capital Bank had not been able to increase the capital of the banks to address the insolvency.
"Consequently, to protect customers, the BoG has decided to revoke the licenses of UT Bank and Capital Bank under a Purchase and Assumption transaction," it added.
The terms of the Purchase and Assumption transaction allows the largest state bank, GCB Bank (formerly Ghana Commercial Bank) to take over all deposit liabilities and selected assets of both UT Bank and Capital Bank.
The statement explained that these actions which were in line with the provisions of section 123 of the Banks and Specialized Deposit Taking Institutions (SDIs) Act, 2016 (Act 930) were taken in order to protect depositors funds.
"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. Customers may continue banking at the UT Bank and Capital Bank branch locations (which have now become branches of GCB Bank); and ATMs will continue to be available," Bank of Ghana assured the public.
While all depositors will have access to the full amount of their deposit accounts, and will be able to access their accounts and all their normal banking transactions in the GCB Bank Ltd, the central bank urged borrowers to comply with all the terms of their legally enforceable loan agreements including all conditions associated therewith, especially with regard to repayment terms.
UT bank, a medium-sized financial services provider was converted from UT Financial Services (UTFS), formerly Unique Trust Financial Services, into a full universal bank status in 2011. Capital Bank, previously First Capital Plus Bank, was also converted from First Capital Plus Saving and Loans Company to a commercial bank in December 2013.
The two were among nine banks which had been suffering insolvency leading to a request by the International Monetary Fund (IMF) for steps to be taken to shore up the Capital Adequacy Ratio of such banks or have them dissolved.
The seven others, according to the Bank of Ghana, had met the capital adequacy requirements as of July 2017, leaving only UT Bank and Capital Bank.
When contacted by Xinhua, Stephen Asimeng, Chief Executive Officer (CEO) of UT Bank confirmed knowledge of the decision but declined any further comments.
Until the collapse of the two banks the West African country had 36 commercial banks with three more licenses waiting to be issued, as market analysts argue for merges among some of the smaller banks to create enough capital space for them to be able to compete in the ever growing industry.
