On August 16, 2019, the Bank of Ghana (BoG) revoked the licenses of 23 insolvent savings and loans companies, including GN Savings and Loans Limited, under Section 123 (1) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).
The BoG appointed a Receiver for these institutions as per Section 123 (2) of Act 930 to manage the situation. The decision followed prolonged engagements with the affected institutions, hoping they would recapitalize and return to solvency, but these efforts proved futile.
GN Savings and Loans, originally licensed in 2006 and later reclassified in 2019 due to its inability to meet new capital requirements, failed to resolve its liquidity crisis despite interventions.
The Bank of Ghana stated, “The institution has been unable to resolve its liquidity crisis and has also not met the majority of conditions imposed following its reclassification.” The financial condition of GN deteriorated significantly, with a capital adequacy ratio (CAR) of -61%, far below the required minimum of 13%.
The BoG highlighted GN’s severe liquidity crisis, noting numerous customer complaints about inaccessible deposits. The institution failed to maintain the minimum cash reserve requirement of 10% of total deposits since early 2019.
Additionally, GN’s insolvency issues stemmed from significant funds extended to related parties within the Groupe Ndoum network, violating prudential norms and contributing to its financial downfall.
“GN’s insolvency problems are largely attributable to overdraft and other facilities it extended to its related parties,” the BoG noted.
Furthermore, GN Savings and Loans faced various regulatory violations, including unauthorized transfer of depositors’ funds to an affiliate company in the USA, failure to publish audited accounts for 2018, and suspension of operations in numerous branches without BoG approval.
The BoG concluded that GN’s practices posed significant risks to depositors’ funds, necessitating the revocation of its license. The BoG emphasized the need for strict adherence to regulatory standards to ensure the stability of the financial sector.
Source: www.ghanaweb.live