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General News of Thursday, 5 September 2019


Gabby is ‘ignorant’ on technical financial issues - Isaac Adongo

Member of Parliament (MP) for Bolgatanga Central Constituency Isaac Adongo has asserted that Gabby Asare Otchere-Darko, a high ranking member of the governing New Patriotic Party (NPP) and a confidante of President Nana Addo lacks a deeper understanding of issues in the financial sector and must stay away from technical issues in that sector.

In a response to an article purportedly issued by Mr Otchere Darko with an accompanied Bank of Ghana memo suggesting that the BoG under Dr Johnson Asiamah gave a needless GH¢860 million liquidity support to UT Bank to cover up debts of Ibrahim Mahama’s companies, Hon. Isaac Adongo said the assertion and claims by Gabby are born out of ignorance and shallow understanding of the technicalities in the financial sector.

He wrote “It is interesting that anyone with a passing knowledge of finance will contemplate that extending liquidity support to a bank can help hide or cover up loans on its books and yet in making the application for single obligor waiver you disclose the so called loans to be covered up.

For the sake of education, liquidity support does not contribute to the variables used in calculating single obligor limits. Single obligor limit is calculated on Tier one capital. Tier one capital is stated capital, income surpluses and reserves. So, how does granting liquidity support to a bank improve its single obligor obligations? While i can understand the lack of appreciation of the issues as exhibited in the article, I think it further exposes why Mr Otchere-Darko must stay away from technical issues on finance to avoid miseducating our young and student folks”.

He further argued that being a lawyer, Mr Gabby Otchere-Darko should have understood and appreciated the relevant laws under which the BoG acted in giving liquidity support to UT Bank at the time adding “Mr Otchere-Darko ought to know that the Bank of Ghana is a ‘lender of last resort’ in its functions to develop, maintain and strengthen the stability of the financial system in accordance with law.

Section 46 (1) (h) of the repealed Bank of Ghana Act, 2002 (Act 612) (the operative law in May 2016 when the liquidity support was given to UT Bank) clothes the BOG with the powers to extend liquidity support to the banking sector as follows ‘grant, on the conditions determined by the Board, advances to financial institutions for fixed periods not exceeding three months against publicly issued treasury bills of the government maturing within ninety-one days of the issue.’

Therefore, as a lawyer, one would have expected Mr Otchere-Darko to have backed his analysis with the relevant laws that the BoG actions at the time broke but as was to be expected, he failed to mention any.

Since additional knowledge is not a crime, let me remind Lawyer Otchere-Darko that until 14th September 2016, when the amended Bank of Ghana Act was assented to and became law, Act 612 of 2002 was the operative law on 12th May 2016.

And that made it legally permissible and in fact duty bound by BOG to provide liquidity support to banks in need of and qualified to receive same”.

He explained further that UT Bank at the time was faced with serious shareholder disagreements, with the International Financial Corporation working hard to resolve it. The BoG was aware of investors who expressed interest in acquiring UT Bank and was working to help improve UT Bank to be acquired to enable the Ghanaian tax payer recoup its funds and not the hurry with which BoG collapsed it. The Republic Financial Holding was willing to acquire the bank on condition that BoG will ring-fence its liquidity support for a period but Dr Addison refused this proposal and rather collapsed the bank. This led to BoG writing off Ghc860 millions of tax payers’ money”.

On the content of the memo from BoG purportedly shared by Mr Otchere-Darko, the Bolgatanga Central Constituency Member of Parliament said “What I see in the memo is an approval of restructuring of a couple of facilities which individually may not require waiver of single obligor limit but cumulatively as related party facilities may require waiver of single obligor obligations. Any Governor who is desiring of helping a bank deal with an existing non-performing loan to make it perform would grant the approval based on a sound business, legal and financial case.

The memo basically identifies the loans that have been restructured and seeks approval for both the restructured facilities and the consequential waiver of single obligor obligations for the loan”.