The Minority in Parliament says government’s decision to establish the Ghana Amalgamated Trust (GAT) to help some local banks meet minimum capital is illegal.

Deputy Minority Leader, James Klutse Avedzi, says unless government properly establishes the Trust by seeking parliamentary approval, they will not back the request for a sovereign guarantee.

“We have few issues that need to be clarified and the committee which is still working on that is demanding number of documentations. First of all, GAT is alien to Parliament and we don’t know what it is…is it a company set up by who?

“Why do you introduce a company that is alien to Parliament and bring it for us to work and give it a sovereign guarantee to go and borrow money,” he quizzed.

GAT’s formation and debt sale come in the closing stages of a sector cleanup during which lenders had to raise their capital holdings, a process which cut the number of banks by almost a third to 23.

Government created it as a special-purpose vehicle which will use a debt sale’s proceeds to purchase shares in five lenders and help them meet a minimum capital threshold of GH¢400 million.

Government is to start a debt sale this month to prop up lenders as authorities seek ¢2 billion ($403 million) in finance for undercapitalized banks.

Related: Ghana to start $403m debt sale for GAT Feb.18

Finance Minister, Ken Ofori-Atta

The beneficiaries are National Investment Bank Ltd., Agricultural Development Bank Ltd. UMB Bank Ltd., Prudential Bank Ltd. and the merged entity of BSIC Ghana and Omni Bank Ltd.

But the NDC MPs say they will not support plans by government to get parliamentary approval for a ¢2 billion sovereign bond for the initiative.

Their action follows the Finance Minister, Ken Ofori Atta, laying a document in Parliament requesting approval for the sovereign guarantee on Friday, which has been referred to the Finance Committee.

He explained that when government went for bond for Energy Sector Levy Act (ESLA), the special-purpose vehicle used to raise funds for the energy sector, its basis was the Act passed by Parliament.

Mr Avedzi said ESLA has the legal backing to go and raise a bond or loan.

“In this case, we have not established or given the authority to government to establish any company for Ghana,” he stated.

The Ketu North MP said the Minority will raise an objection when the time comes for the debate for such approval, for the records to capture that.

He also raised other issues related to GAT questioning the selection criteria of the banks which were deemed to have qualified.

“Are they the only companies that need support? What is the legal basis for that,” he queried.