Bank of Ghana
A High Court in Accra has reversed the Bank of Ghana’s (BoG) revocation of the operating licence of Ideal Finance Limited.
According to the court, the Central Bank did not exhaust all the legal procedures before revoking the once-defunct financial institution’s licence.
The court’s decision essentially restores the operating licence of Ideal Finance, paving the way for it to resume operations.
Ideal Finance was among 23 financial institutions to have their licences revoked by the Bank of Ghana in 2019.
The financial sector cleanup exercise was aimed at restoring confidence in the banking system, driven by persistent concerns about the unsustainability of some financial institutions.
The Central Bank indicated that the revocation of the licences of these institutions had become necessary because they are insolvent even after a reasonable period within which the Bank of Ghana has engaged with them in the hope that they would be recapitalised by their shareholders to return them to solvency.
“It is the Bank of Ghana’s assessment that these institutions have no reasonable prospects of recovery, and that their continued existence poses severe risks to the stability of the financial system and to the interests of their depositors,” BoG clarified.
In the case of Ideal Finance Limited, the BoG indicated that the financial institution has been faced with severe insolvency and liquidity challenges over the past two years.
“The Institution faces a significant capital shortfall with a Capital Adequacy Ratio (CAR) of negative 33% in breach of the minimum required of 13% with a corresponding capital deficit of negative GH¢188,257,625.35,” it said.
The Central Bank further pointed out that Ideal Finance Limited was also facing a severe liquidity crisis, with numerous complaints received by the Financial Stability Department of the Bank of Ghana from aggrieved customers who had been unable to access their deposits with the institution for the last several months.
“What is more, it has consistently failed to meet the minimum cash reserve requirement of 10% of its total deposits,” it stressed.
BoG added that the institution’s shareholders have failed to restore the bank to the required regulatory capital and liquidity levels in spite of long-standing promises that new capital was expected from foreign investors.
BY Gibril Abdul Razak