Capital Bank was insolvent at the time of the takeover – Ato Essien

The managing director of the now defunct Capital Bank, William Ato Essien, admitted in a court in Accra that the bank was indeed insolvent when it was merged into GCB Bank.

Mr Essien is on trial for his role in the bank’s collapse, including the embezzlement of GH ¢ 620 million in liquidity aid from the Bank of Ghana.

He argued, however, that the bank would have prospered if given the time and space.

Asked by his lawyer, Baffour Gyau Bonsu Ashia, about Capital Bank‘s solvency just before the takeover, William Ato Essien said the bank was “below the capital adequacy ratio”.

When asked to explain what this meant, Mr Essien said “according to the Central Bank ratios we were insolvent”.

But, he insisted that “this is a normal occurrence” in the industry and would have been rectified with an “injection of more capital” into the bank; a “classification of bad debts”, and a recovery of the bad bank in excess of income “.

According to him, the insufficient capital ratio was the only problem facing Capital Bank compared to the Bank of Ghana.

William Ato Essien had tried unsuccessfully to dismiss the case against him after the prosecution closed its case months ago.

Mr. Essien, along with others, faces 26 different charges.
Financial sector consolidation

It was found that Capital Bank owed GH ¢ 468 million which was allegedly due to the negligence of the board of directors of the financial institution at the time.

It was one of nine banks that collapsed over a 12-month period starting in August 2017.

The other banks were UT, which was acquired by the state-owned GCB Bank along with Capital Bank.

Beige Bank, Sovereign Bank, Construction Bank, uniBank and Royal Bank have been consolidated into the Consolidated Bank of Ghana.

The decision to go bankrupt all the banks was mainly due to the fact that they had all become very insolvent for various reasons, including poor corporate governance decisions.

The crisis affected the deposits of some 1.5 million Ghanaians, although the government intervened to protect their money.

Protecting depositors has so far cost the state GH ¢ 9.9 billion, according to the finance minister.