It has emerged that the Bank of Ghana revoked the licence of Heritage Bank just a few days after trying to force the same bank to merge with the Universal Merchant Bank (UMB), which the shareholders of the former resisted.
According to Mr Mensah Thompson, the Executive Director of the Alliance for Social Equity and Public Accountability (ASEPA), “In December 2018, the Bank of Ghana invited the shareholders of Heritage Bank to a meeting. At the meeting, they [Bank of Ghana] proposed to Heritage Bank to merge with the Universal Merchant Bank (UMB)”.
“So, the shareholders of Heritage Bank said: ‘No. We’re a strong bank, very solvent; why do you call us and tell us to go and merge with a very weak bank?’”
“So, they [Heritage Bank] declined the merger”, Mr Thompson recalled.
He said: “A few days after Heritage Bank declined to merge [with UMB], the Bank of Ghana revoked their licence”.
“A bank, which was strong enough for the Bank of Ghana to ask it to merge with another bank, the same entity that was going to supervise the merger, revoked their licence. This is extremely cruel”, he said at a press conference captured in a short video documentary detailing the events that led to the collapse of Heritage Bank.
“Now, they [BoG] said the majority shareholder of Heritage Bank was ‘not fit and proper’ to own a bank”, adding: “We’ve never heard in this country that only certain people of a certain category are fit and proper to own banks while others can’t. What kind of country are we in?”
“Now, they gave another reason: they said the bank was overexposed to its majority shareholder because he has 70 per cent shares in Heritage Bank. Now, amazingly, [in another bank], 96 per cent of its shares was owned by one individual. But, somebody, who owns 70 per cent shares, the Bank of Ghana said they don’t understand why one person owned 70 per cent shares in a bank. But they understand and accept that one person can own 96 per cent shares in another bank”, Mr Thompson compared.
“And the explanation given for the cruel takedown of Heritage Bank is the most ridiculous explanation in this whole banking sector reform conversation”.
The BoG revoked HBL’s licence on Friday, 4 January 2019 on the basis that the majority shareholder, Mr Agongo, among other things, used proceeds realised from alleged fraudulent contracts he executed for the Ghana Cocoa Board (COCOBOD), for which former COCOBOD CEO, Dr Stephen Opuni and he, are being tried, to set up the bank.
Announcing the withdrawal of the licence, the Governor of the central bank, Dr Ernest Addison, told journalists – when asked if he did not deem the action as premature, since the COCOBOD case was still in court – that: “The issue of Heritage Bank, I wanted to get into the law with you, I don’t know if I should, but we don’t need the court’s decision to take the decisions that we have taken. We have to be sure of the sources of capital to license a bank; if we have any doubt, if we feel that it’s suspicious, just on the basis of that we find that that is not acceptable as capital. We don’t need the court to decide for us whether anybody is ‘fit and proper’, just being involved in a case that involves a criminal procedure makes you not fit and proper”.
HBL was added to Consolidated Bank Ghana Limited (CBG), which was first formed when the central bank collapsed some five local banks in August 2018. They included The Royal Bank, The Beige Bank, The Construction Bank, Sovereign Bank and uniBank. Later on, HBL and Premium Bank were added to the first five.
After Heritage Bank was collapsed, the founder of the All People’s Congress (APC), Mr Hassan Ayariga, said at a press conference on Tuesday, 5 February 2019: “Inasmuch as I agree certain banks needed to be consolidated, I strongly disagree with one of the banks that was consolidated on Christmas Eve, the Heritage Bank. I clearly see mischief and witchhunt”.
He explained that: “Of all the nine banks that the Bank of Ghana collapsed, only Heritage Bank was a solvent bank, yet its licence was also revoked”.
“By being solvent, Heritage Bank did not pose a risk to customers or other banks in the banking sector and the entire economy”.
“Therefore, collapsing Heritage Bank was purely to satisfy personal desires and not in the interest of the banking sector or the economy”, Mr Ayariga argued.
In his estimation, “By choosing to collapse Heritage Bank when it did not pose a threat to third parties, the Bank of Ghana rather denied a hardworking businessman of his investments, and in the process, put the livelihoods of about 250 people and their families and dependents at risk”.
“The professions of the staff”, he said, “have now been jeopardised just because of an individual using state authority and central bank powers to satisfy personal interests”.
“This is a bad precedent that must be criticised by all well-meaning persons and the outcome reversed with immediate effect to help prevent a situation where it inspires future actions.
“Fellow citizens, given that Heritage Bank was solvent and, therefore, not a risk to any third parties, if the Bank of Ghana suspected anything, it could have used other alternatives provided under the BSDI Act 930 to exclude Mr Seidu Agongo from exercising his rights as a shareholder until the determination of the case at the High Court. But to meet the personal interest and deprive him of owning a bank, simply because he is the one, BoG decided to revoke the licence and put the lives of the staff, other shareholders and even customers at risk”, Mr Ayariga added.
It’s unfair and unfortunate – Prince Kofi Amoabeng
In September 2019, the founder and CEO of the now-defunct UT Bank, Mr Prince Kofi Amoabeng, whose bank was also collapsed, also described as unfair and unfortunate, the revocation of the licence of Heritage Bank, whose founder has always argued that the bank was collapsed despite its books being above board.
Asked directly by Accra-based TV3’s Paa Kwesi Asare in an interview on Business Focus: ‘Do you think, as many think, that some of the decisions to close down certain banks was politically motivated?’ Mr Amoabeng answered thus: “A few of them, specifically Heritage Bank”.
“I don’t understand the issue because the Chairman of the Board is Dr Kwesi Botchwey. I have a lot of respect for him when it comes to finance in this country and managing Boards and he will not, in my estimation, ever accept to be Chairman of a bank that is not right and dealing in all sorts of things.
“I can say that for him, so, I find it extremely odd that a bank – and it had not started doing business for it to have bad loans and all those things – and for you to say that the owner didn’t have what it takes or however they put it, I mean the owner doesn’t run the bank, he’s a Ghanaian, he’s got money, he’s appointed the right people to run the bank for him, so, what is the excuse.
“I find that extremely, extremely unfair”, Mr Amoabeng asserted, adding: “Maybe I don’t have all the facts, but from where I stand, I find it really unfortunate”.
It’s painful – Kweku Baako
Another person who had issues with the collapse of Heritage Bank is Editor-in-Chief of the New Crusading Guide newspaper, Abdul-Malik Kweku Baako, who described it as “painful”.
Similarly, Kweku Baako expressed qualms about the central bank’s collapse of uniBank and GN Bank, which, respectively belonged to the former Governor of the Bank of Ghana, Dr Kwabena Duffuor and former presidential candidate Dr Papa Kwesi Nduom.
“I felt for the three banks: Nduom’s bank [GN Bank], Heritage Bank that belongs to that young man, Seidu Agongo (because of his extension into radio we met a couple of times in 2014 and 2015) and Dr Duffuor’s bank [uniBank]”, he said on Accra-based Peace FM’s Kokrokoo morning show.
In reference to Mr Agongo, Kweku Baako said: “He is a young man and I appreciated him and I want to see a young man like him who does great things”, adding: “It was painful his bank went down”.
“The same with uniBank”, he said.
“I will tell [you] honestly; Dr Duffuor is a personal friend but the action taken against the banks was not right”, he added.
‘Not fit and proper’ tag ‘capricious, arrogant, malicious’ – Agongo responded to BoG
Following the collapse of the Heritage Bank, its majority shareholder, Mr Agongo, responded to the central bank’s reasons for its action, via a press statement in which he said that the “not fit and proper” tag stamped on him was “capricious, arrogant, malicious and in bad faith”.
According to Mr Agongo, “In purportedly making the determination, the central bank obviously had little regard for the time-honoured principle that a person is presumed innocent until proven guilty by a court of competent jurisdiction”, adding: “The fact that I have a case pending before the High Court is a matter of public knowledge but my guilt or innocence is yet to be determined by the Honourable Court”.
“The determination that I am not a fit and proper person to be a significant shareholder of HBL because the central bank suspects the funds are derived from illicit or suspicious contracts with Cocobod is not only calculated to pre-judge the outcome of the criminal proceedings but also violative of the principle of presumption of innocence to which every individual is entitled. Since when has suspicion become a substitute for credible evidence?” Mr Agongo asked.
Also, the erstwhile Prof Botchwey Board of the bank issued a statement on the matter in which it said: “Heritage Bank was by the Bank of Ghana’s own admission, a solvent bank. It NEVER received liquidity support from the Bank of Ghana. Its corporate governance record had never been impugned by the Bank of Ghana. We believe we have been done a grave injustice and a terrible precedent set that does not bode well for the future”.
Read that full statement below:
PRESS RELEASE BY THE FORMER BOARD OF DIRECTORS OF HERITAGE BANK LIMITED (CURRENTLY UNDER RECEIVERSHIP)
The Bank of Ghana on Friday, 4th January 2019 announced the revocation of the banking licence of Heritage Bank Limited on the following grounds;
(1) Suspicions relating to the source of the bank’s capital and matters related therewith including the claim that it was derived from contracts with COCOBOD which were the subject matter of an ongoing criminal prosecution;
(2) Issues around the shareholding of the bank and alleged nondisclosure of ultimate beneficial shareholders;
(3) several related-party transactions which were not above board;
(4) the significant shareholder was not ‘fit and proper”.
We would have preferred not to enter into any public disputation about these matters with the Central Bank so as not to further darken the cloud that hangs over the ongoing banking sector reforms. However, we owe a duty to ourselves, our cherished customers and our dedicated staff, who, in the face of numerous challenges remained committed to the vision of the bank to the very end, and to the general public, who have been keen observers of the developments in the banking sector, to clarify certain claims in the press release by the Bank of Ghana that are either complete falsehoods or inaccurate at best. We wish, therefore, to state as follows:
(1) Suspicious source of capital and related matters
We find it puzzling that the Bank of Ghana should now be disputing the existence of a contract between HBL’s main shareholder and COCOBOD, when the bank, as part of its due diligence ahead of the granting of HBL’s provisional banking licence, had requested and received confirmation from COCOBOD of the existence of the contractual arrangements between COCOBOD and the said shareholder.
We also want to state on record that Heritage Bank NEVER RECEIVED, nor is the Board aware of any order from the High Court (or any other court for that matter) for disclosures relating to any contract involving Mr Seidu Agongo. Indeed, we are hearing of this matter for the VERY FIRST TIME through the Governor’s news conference. In any case, we are unable to fathom why the High Court would order Heritage Bank to make disclosures in respect of a contract that it is not a party to or a custodian of.
Furthermore, it is even more puzzling that the Bank of Ghana would claim it has no knowledge of Mr Seidu Agongo being a shareholder of Sarago Limited. The shareholding structure of Sarago Limited is a matter of public record since it is a registered company at the Registrar-General’s Department. More importantly, the Bank of Ghana, in its own provisional licence to Heritage Bank, stated as a condition that the concentration of HBL’s shareholding in Mr Seidu Agongo and Sarago Limited be diluted within three years of the commencement of operations. Mr Agongo’s association with Sarago Limited was, thus, known to the Bank of Ghana at the time of the licensing.
On the issue of the transfer of an amount of GHS15.8m and the acquisition of some properties owned by the main shareholder which were stated in the Financial Statements of 2017, it will be misleading on the part of Bank of Ghana to claim that the bank and its shareholders, directors and management have failed to clarify matters. The records at the bank are very clear on these transactions and could have been very easily verified by the Banking Supervision Department if, indeed, they had any issues with the figures.
Furthermore, the Bank of Ghana, through the Banking Supervision Department WAS NOTIFIED IN WRITING about these entries. A Sale and Purchase Agreement covering the acquisition of the buildings, together with copies of the Valuation Reports from a competent property valuation firm were all duly forwarded to the Bank of Ghana. From the documents referred to above, there is, thus, no basis for any doubts about the name of the shareholder whose property was being acquired.
The valuation reports from the professional valuers also do give the basis of the valuation; and do, indeed, establish the basis for the prices agreed and captured in the Sale and Purchase Agreement that was executed between the two parties in the transaction. Even disregarding the correspondence sent to the BOG on this matter, A TEAM FROM THE BANKING SUPERVISION DEPARTMENT of the Bank of Ghana did carry out an onsite inspection in July 2018 (last year).
This team did have all documents made available to them and did express satisfaction with the explanations that were given them by management. Everything about the transaction was, thus, totally above board and made available to the Bank of Ghana.
(3) The grounds for the revocation of HBL’s licence also included a claim that the bank had approved ‘several related-party transactions’, that is loans and facilities to its main shareholder. Three companies were cited in the Governor’s statement:
SASSH ALLIANCE: Heritage Bank gave facilities totalling GHS6m; an Overdraft of GHS3m, and a Bank Guarantee of GHS3m, which were fully collateralised, were subjected to the standard credit requirements and were duly approved by the Board in accordance with S.67 of Act 930. These are the only transactions with SASSH ALLIANCE.
MOOR COMPANY LIMITED: The company had a vehicle leasing contract with Heritage Bank by which it provided the bank with its vehicles. This contract was terminated when the bank purchased the vehicles.
KEDGE COMPANY LIMITED: The company rents out properties to some of Heritage Bank’s branches.
All the above transactions were handled in a transparent manner and at arm’s length. Apart from the credit facility to Sassh Alliance, Heritage Bank has no exposure to any of the companies mentioned.
(4) The significant shareholder was not fit and proper
It is not clear to us how the Bank of Ghana came to this conclusion, but this is a matter obviously best dealt with by the said shareholder in any manner that he shall deem appropriate. Suffice it to say only that neither the bank nor its directors or shareholders were afforded the statutory notice period by the Bank of Ghana, within which to have responded to the allegations made prior to the abrupt revocation of its licence, contrary to the provisions of the very same law under which the licence was revoked.
As a Board, we had engaged with the Bank of Ghana including the Governors on numerous occasions, ALL in relation to meeting the capital requirement, and at no time had the issues now being given as grounds for the revocation of the bank’s licence been raised. Indeed, as recently as December 24, 2018, the Bank of Ghana had given Heritage Bank clearance for a potential investor who had brought proof of funds to transfer the money. We had considered and applied for consideration under the Ghana Amalgamated Trust scheme and had received positive signals. We were literally in conversation with our prospective investor when the bank was summoned at about 12 p.m. to a meeting at 2 p.m. and handed a letter revoking the bank’s licence.
Heritage Bank was by the Bank of Ghana’s own admission, a solvent bank. It NEVER received liquidity support from the Bank of Ghana. Its corporate governance record had never been impugned by the Bank of Ghana. We believe we have been done a grave injustice and a terrible precedent set that does not bode well for the future. We have dealt herein only with matters affecting the Board’s responsibilities that needed to be clarified to set the record straight, and this, without prejudice to whatever legal options the shareholders may wish to avail themselves of in order to get justice for the even greater harm done to them.
PECB certification of Heritage Bank after collapse
About two weeks after collapsing Heritage Bank, the world-renowned Canada-based certification body, PECB, located in Montréal, issued a management system certificate to HBL.
PECB, which is a respected certification body for persons, management systems, and products on a wide range of international standards, said in its correspondence to the erstwhile management of Heritage Bank: “It is with great pleasure that we congratulate your company on attaining the PECB Management System Certificate signifying that your organisation has been assessed and found to be in accordance with the management system requirements in ISO/IEC 27001:2013”.
“The scope of HBL Information Security Management System (ISMS) includes all employees, business and support activities carried in HBL’s Head Office and Datacenter Facility based at Plot No 6, Airport City, NCA Tower, First Floor and Part of the Ground Floor, Accra, Ghana, in accordance with Statement of Applicability (SoA), Ver. 1”.
“Your certificate number is: C578-ISMS173-01-19, and is valid until 2022-01-16”, the correspondence signed by CEO Eric Lachapelle; and President & COO Faton Aliu said.
PECB noted: “In order to maintain the certificate, your organisation will be subjected to two surveillance audits. The first surveillance audit will take place no longer than 12 months from the initial certification audit. Additionally, the second surveillance audit will take place in no longer than 12 months from the first surveillance audit”.