The Bank of Ghana (BoG) says it revoked the licence of GN Savings and Loans for its insolvency and liquidity challenges as well as other key regulatory violations.

BoG noted that despite efforts to assist GN to recapitalise and return to solvency,  it was unable to resolve its liquidity crisis, and was also not able to meet the majority of the conditions the Central Bank imposed on the institution following its reclassification as a savings and loans company.

Justifying its decision to revoke the licence of GN Bank in 2019, a statement from BoG further indicated that the financial condition of the institution had also deteriorated since the reclassification with both a negative capital adequacy ratio and negative net worth.

“The Bank of Ghana has reached the conclusion that GN is currently insolvent under section 123 (4) of the Banks and SDIs Act, 2016 (Act 930), being in breach of its key prudential regulatory requirements. Its Capital Adequacy Ratio (CAR) is currently -61%, in breach of the minimum required of 13%,” it said.

“It must be noted that GN’s insolvency problems are largely attributable to overdraft and other facilities it extended to its related parties who are other companies in the Groupe Ndoum network of businesses, under circumstances that violated relevant prudential norms. Of particular interest are the funds totalling GHC761.55 million that GN Bank as it then was, placed with its sister companies Ghana Growth Fund (Gold Coast Advisors) and Gold Coast Fund Management Limited (now Blackshield Capital Management), both licensed by the Securities and Exchange Commission,” BoG added.

The Bank further noted that “some of these funds were used by the two related parties to pay their customers whose investments with them had matured, while some were also used to fund road and other contractors, who claim to have worked on government projects.”

It added that the Interim Payment Certificates (IPCs) claimed by GN were not supported by transactions that were entered into directly by GN and such contractors or government and its entities. It said they reflected transactions entered into by Ghana Growth Fund or Gold Coast Fund Management with these contractors using funds taken from GN under circumstances that violated prudential norms.

According to BoG, in addition to GN’s insolvency and liquidity challenges, the institution’s adjusted net worth of negative GHC30.70 million, as of May 2019, indicated that its paid-up capital was impaired in violation of Section 28(1) Act 930.

“The structure of GN’s balance sheet clearly shows that the bank mobilizes deposits for its related companies. The inability of these related companies to honour their obligation to GN has resulted in serious liquidity challenges and contributed to their insolvency as all related party exposures are non-performing. The institution’s high non-performing loans (NPL) were mainly attributed to these related party exposures, which were never paid, thereby putting the deposits of its customers at risk,” the statement said.

BoG said its recent investigation conducted at GN revealed that a whopping $62,255,516.93, £718,528.59 and €4,200 of depositors’ funds held with GN had been transferred to International Business Solutions, another company owned by Groupe Nduom and which is based in the U.S.A without any documentation to support such transfers in breach of section 19 of the Foreign Exchange Act 2006, Act 723, Section IV of Bank of Ghana Notice No. BG/GOV/SEC/2007/4, and subsequent Bank of Ghana Notices issued in August 2014 prohibiting such practices.

“The company is yet to publish its 2018 audited accounts contrary to section 90 (2) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930). Furthermore, the company did not keep accounting records in a manner that gives an accurate and reliable account of the transactions of the company, and did not therefore show a true and fair view of its operations,” BoG said.

“GN has suspended operations in 70 of its branches including the Head office branch at Asylum Down and Castle Road branch, and temporarily suspended its entire management team without the approval of the Bank of Ghana contrary to section 25 (2) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930), mainly as a result of its insolvency and liquidity challenges,” it added.