The Royal Bank

Royal Bank was licensed as a universal bank in October 2012. It has over the last few years experienced solvency and acute liquidity challenges. An on-site examination conducted by Bank of Ghana in 31 March 2018 revealed a number of irregularities. Bank of Ghana appointed an advisor for Royal Bank in May 2018 to advise management of the bank, with the primary mandate to stabilize and improve the affairs of the bank.

Circumstances leading to the appointment of the receiver

Based on Bank of Ghana’s assessment, Royal Bank was insolvent and faced with liquidity challenges. Specifically:

– The bank suffered severe capital impairment due to under-provisioning for loans, over estimation of investments with other financial institutions, and overstatement of capital on account of fixed assets which were rejected by Bank of Ghana for capital purposes. This resulted in an adjusted capital of negative GH¢484 million, yielding a CAR of negative 80.53% with capital deficiency of GH¢567.78 million and a net-worth of negative GH¢498.63 million as at 31 May, 2018;

– The bank has persistently faced serious liquidity challenges since September 2017, resulting in the continuous breach of the cash reserve ratio required by section 36 of Act 930.

– Its non-performing loans constitute 78.79% of total loans granted, owing to poor credit risk and liquidity risk management controls;

– A number of the bank’s transactions totaling GH¢161.92 million were entered with shareholders and related parties structured to circumvent single obligor limits under Act 930, conceal related party exposure limits under Act 930, and to overstate the capital position of the bank for the purpose of complying with the capital adequacy requirement.

-The Bank’s total assets and liabilities at 30 June 2018 were GH¢1.2 billion (US$250 million) and GH¢1.1 billion (US$229 million) respectively.

Processes that followed

The Receiver, in conjunction with Bank of Ghana and security personnel carried out head office and branch level operational activities to secure the assets of the banks from day

Intervention – Branch Activities
  • Performed cash counts
  • Reviewed branch suspense accounts
  • Verified and took custody of fixed and other assets, to the extent possible
  • Took inventory of cheque books and ATM cards
  • Performed bank reconciliations
  • Took custody of collateral/security files
  • Took custody of credit files
  • Reviewed branch physical security
Intervention – Head Office Actions
Information and Technology
  • De-activated user accounts and retrieved laptops from all key executives
  • Performed shutdown activities
  • Obtained applications and system inventory
Human Resource
  • Took custody, catalogued and commenced review of HR Files
  • Commenced review of employee compensation and benefit plans
  • Review of HR policies and procedures
Loans and Advances
  • Took custody, catalogued and commenced review of credit files
  • Took custody and commenced review of security / collateral files
Activities carried out by the Receiver at branch level, in conjunction with Bank of Ghana and security personnel were as follows:
  • Cash Counts
  • Branch Suspense Account reviews
  • Fixed Assets Verifications
  • Inventory of Cheque Books & ATM Cards
  • Cash/Bank Reconcilations
  • Collateral and Security Files Review
  • Credit Files Review
  • Review of Physical Security
Branch Spread Analysis
Within AccraOutside AccraTotal Branches
Communication and Stakeholder Engagements
Publication of Notice of Appointment of Receiver at the each Branch of the Banks

As part of the intervention activities and in line with Section 125(2) of Act 930, the Receiver displayed notices at each branch of the five (5) banks in receivership. The content of the notice covered the appointing authority of Receiver, the effective date of assuming control of the banks and also highlighted that the authority and functions of the management of the respective banks ceased from that date.

Publication of Notice of Appointment of Receiver in the Print Media

Section 125(5) of the Banks and Specialised Deposit-Taking Act (Act 930) requires the Receiver to publish a notice specifying the action taken in at least two daily newspapers of national circulation. The Receiver published the notice of appointment in three daily newspapers (The Daily Graphic, The Ghanaian Times and The Business and Financial Times) in accordance with Act 930. This was done consecutively for four weeks as stipulated by Act 930. Click here for copies of the publications circulated by the Receiver.

Information to Competent Authorities

Section 125(5) of Act 930 specifies that the Receiver informs competent authorities of the notice of appointment. The Receiver, in this regard, sent letters of notices to the institutions below:

  1. Ministry of Finance (MoF)
  2. The Office of the Attorney General
  3. Ministry of Justice
  4. Ghana Police Service (GPS)
  5. Drivers and Vehicle Licensing Authority (DVLA)
  6. Lands Commission and Lands Title Registry
  7. Ghana Revenue Authority (GRA)
  8. National Security
  9. Social Security and National Insurance Trust (SSNIT)
  10. Central Securities Depository (CSD)

The Receiver notified the Bank of Ghana of the communication to these institutions, together with evidence of newspaper publications, as required by the Act.

Meetings with Key Stakeholders

The Receiver arranged meetings with other major key stakeholders to clarify the role of the Receiver and to execute his mandate. Some of these stakeholders include:

  1. The Bank of Ghana
  2. The Consolidated Bank of Ghana
  3. Criminal Investigation Department of Ghana Police Services
  4. Key management of Banks
  5. Key customers of banks
Communication with Corresponding Banks and Pension Fund Managers

The Receiver sent letters to local and correspondent banks of each of the banks (in receivership) to notify them of revocation of their operating licences and the appointment of a receiver. Other non-bank financial institutions who provided pension trustee services were also notified.

Some of the correspondent banks include; Bank of Beruit, Oddo BHF Aktiengesellschaft, Access Bank, UK, Bank of China, EBI, Ecobank Group. Pension fund managers like GLICO Life, Beige Legacy Pension Trust, Petra Trust Company Limited, Metropolitan Pensions Trust Ghana, Negotiated Benefits Trust Company Limited, Petra Trust Company Limited, were served with letters of notices, with National Pensions Regulatory Authority and SSNIT in copy. 

Termination of Employee Contracts

The Receiver, has served termination letters to employees of all five banks. Letters were also served to terminate the appointment of Directors and Deputy Directors of these Banks. Engagements are ongoing with the Industrial and Commercial Workers Union to negotiate exit packages for affected employees.

Termination of Vendor Contracts
Further to determinations reached by CBG on branches and services they will not require after 28 September 2018 and on CBG’s advice, letters were served to landlords, vendors and service providers of the banks, notifying them of the intention to terminate all existing business agreements and arrangements with an effective date of 28 September 2018.
The services terminated affected the following categories of service providers:
  1. IT Solutions
  2. Medical and health care
  3. Postages and telecommunication
  4. Cleaning, janitorial and Sanitation services
  5. Human resource, recruitment and hiring services
  6. Surveillance, fire alarm and panic control
  7. Office repairs and maintenance
  8. Vehicle and Fuel supply
  9. Office Stationery
  10. Hospitality (Accommodation, Catering and Travels)
  11. Rented Properties
Number of Vendors Terminated for the Bank