How Capital Bank ‘misapplied’ BoG cash

How Capital Bank ‘misapplied’ BoG cash
Source: Ghana || MAD
Date: 13-08-2018 Time: 06:08:18:pm

Details are emerging of how the defunct Capital Bank misapplied 620 million cedis Liquidity Support extended to it by the Bank of Ghana.

The amount was meant to help the struggling bank stay viable.

But the managers, in what the Central Bank calls deceit, allegedly diverted the money into some other ventures.

This, the regulator insists, was in clear violation of the regulations guiding the operations of the bank.

An unsigned statement being circulated on social media has purported to explain the use of the money.

It says “The GHc620m Liquidity Support extended to Capital Bank by the BOG was not free money as has been suggested but loans granted at an average interest rate of 25.1% over the liquidity support period.”

The statement claimed that “In honour of its obligation, Capital Bank paid back a total of GHc255m to BOG (GHc10m was made as principal repayment while a further GHc245m was in regular repayments of about GHc12m a month).” 

But a source says “the stuff that Capital Bank/Essien is/are circulating is rubbish.”

According to the source, the use of the Liquidity Support “has been audited by both Boulders and PwC, and they come to the same conclusions in separate reports dated January 2018 and May 2018 respectively.”

The utilisation of the 620m as captured by auditors is detailed in the table below:

From the table, All-Time Capital and Nordea Capital received a total of 185 million cedis.

As part of a “Round Tripping,” a term used by Capital Bank to explain the application of the amount, part of the bailout money was used to acquire a fresh banking licence from the BoG.

In finance terms, “round-tripping” is a strategy used by businesses who sell an asset to another business with an agreement that the asset will be bought back at a time in the future.

The round-tripping of 185 million cedis represented misapplication of the public funds, a BoG document has said. 

Another expenditure from the Liquidity Support which attracted the ire of the Central Bank, is the GH¢27.5m that Capital Bank said was spent on “business promotion.”

The exact nature of this expenditure is neither known nor justified.


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