Capital Bank was insolvent, had toxic assets and numerous non-performing loans – Ato Essien

The founder of the now defunct Capital Bank, William Ato Essien, admitted that the bank faced serious financial problems before its license was revoked by the Bank of Ghana.

These challenges include many non-performing loans, toxic assets and insolvency. He made these revelations while being led by his lawyer Baffuor Gyau Ashia to testify as he presented his defense.

Mr. Ato Essien alleged in 2019 that Finance Minister Ken Ofori Atta and his partner Keli Gadzekpo attempted to buy Capital Bank in 2016.

It was in an interview with Bonsoir Ghana host Paul Adom Otchere.

“If the bank was that bad, would the current Minister of Finance and Chairman of the Enterprise Board of Directors Keli Gadzekpo come to my office to say that we are interested in buying Capital Bank?” Ken Ofori Attah came to my office in 2016 to make this proposal, ”he said.

Testifying in court on Thursday, Mr. Essien detailed the Bank’s financial difficulties. He initially admitted that the Bank was below the capital adequacy ratio set by the Bank of Ghana.

“It meant according to the Central Bank ratios; we were insolvent. This is a normal phenomenon. he said. He maintained, however, that the bank was in a position to correct this.

“The injection of more capital would have corrected our insolvency status to a solvent status. Number two: the classification of bad debts will allow a significant improvement in our solvency. Finally recovered from the bad bank to a surplus of income, ”he continued.

He gave the following explanation on what explains the state of the bank.

“Non-performing loans are the result of migration and the particular circumstances in which capital banking has transformed from microfinance to savings and loans.

“The Central Bank gave us a savings and loan license, not as a new business. And so my lord, when you are a savings and loan organization, the treatment and regulations of the central bank are totally different from when you are a money lending and microfinance organization. “

Regarding non-performing loans, he continued, “From day 30, day 60, this is flagged as standard. From day 61 to day 90 it is written as substandard. From day 91 to day 120, it is reported as questionable. From day 121 to day 150 it is reported as bad. And from day 151 to day 180 it is reported as a loss.

“This means that if six months of loans we have given have not been repaid, the central bank expects you to provision that as a loss. So just from 2000 to 2008, my lord is over seven and a half years old.

“This rule did not apply when we were operating as a microfinance and money lending company, so when the Central Bank sight examiners asked you to fund 5.7 million on the back of this classification of 180 days when you do this, there won’t be any establishment.

“Number two: this principle was taken from savings and credit to be a universal bank when we arrived at a universal bank. These 5.7 million, which we had indicated to the central bank that we could not provision on our capital, had gone from the 5.7 million on the back of a 10% interest that we were charging at the microfinance level.

Monsignor, the situation even worsened when we became a universal bank. At the universal bank level, you are required to set aside 25% of your liabilities for prudential requirements and wi if you are ¢ 109, you only had access to 75 cedis to work, but you pay interest on the 100 cedis.

“These three elements: classification, regulated interests and the demand for prudential requirements are what undermined all our efforts to recover a principal amount of 4.9 million euros out of the 5.7 million euros. euros, but it did not make a significant difference as it was to accumulate interest on the interest.

Between 2013 and 2015, the total of the Bank’s non-performing loans, as well as the default shareholder loans, had been constituted to the tune of 620 million euros. Thus, the non-performing loans had now produced a reclassification which required the separation of the tBank’sk operation of savings and loans from that of a universal bank.

“That 620 million yen could not be provisioned because if we did it as a bank, all the gains we had made were going to be wiped out. So we made two major decisions. The creation of a bad bank and a good bank. An accounting principle universally accepted and used. This toxic asset of 620 million euros was to serve as the basis for the creation of the bank.

Capital Bank was one of the first banks to collapse after the massive cleanup of financial institutions by the Bank of Ghana (BoG) from 2017.

Mr. Essien and other defendants have been charged with theft, money laundering and conspiracy to steal. The case was adjourned until November 25.

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