George Akrofi Addo, an Assistant Director at the Banking Supervision Department of the Bank of Ghana (BoG), has testified that loans amounting to about GH¢300 million were unclassified at the Beige Bank, per the Central Bank report.
As a result, Mr. Addo said, the Beige Bank was declared insolvent at the revocation of its license on August 1, 2023.
Testifying as second prosecution witness (PW2) in the trial of Michael Nyimaku, former Chief Executive Officer (CEO) of the Beige Group, Mr. Addo indicated that the accused admitted his bank’s challenges two days before the revocation.
He told an Accra High Court, presided over by Justice Afia Serwaa Asare-Botwe, yesterday, that the accused wrote to the Central Bank requesting liquidity support, since Beige Bank was not a viable business.
The witness, while being cross-examined by Thaddeus Sory, Counsel for the accused, indicated that Beige Bank was not meeting the withdrawals of depositors, hence, putting it in an emergency situation.
According to him, BoG had a responsibility to regulate and supervise orderly an exit of any bank that was failing.
However, Mr. Sory raised concerns over why BoG would revoke the bank’s license on the strength of a letter the accused had written.
He further stated that if an emergency was the silver lining for its letter dated July 31, 2018, it did not just revoke the licence of the bank, but rather gave it an additional 10 days to make some specific adjustments.
The witness, in response, said the bank’s license was revoked on two grounds – insolvency and emergency situation – which were contained in both the BoG report and Beige letters.
Mr. Nyimaku is facing 43 counts of stealing, fraudulent breach of trust, and money laundering, involving the siphoning of a total of GH¢1.2 billion.
He has been granted bail in the GH¢200,000.
Q. Please, give your full name to the court?
A. My name is George Akrofi-Addo.
Q. Where do you live?
A. I live at Haatso in Accra.
Q. Where do you work?
A. I work at Bank of Ghana, at the Banking Supervision Department, as Assistant Director.
Q. Do you know the accused person?
A. Yes.
Q. On 7th December, 2020, you have a witness statement in this matter. Is that so?
A. That is so.
Q. Kindly identify if it is your signature?
A. It is my signature.
Prosecution: I will like to tender the witness’ statement.
Defence: No objection.
(Document tendered)
Witness reading: Loans amounting to GH¢300 million were improperly classified and not in accordance with Bank of Ghana classification…
Cross-examination
Q. Please, look at Paragraph 2 of your witness statement. Now indicate where you live at Haatso.
A. …Mabey Street.
Q. Take a look at Paragraph 13. It reflects that the bank was written to, and the findings of the Bank of Ghana made available to him. You still stand by that?
A. Yes.
Q. Exhibit AF is a confirmation of Paragraph 13 of your witness statement that the bank was written to…?
A. Yes.
Q. The BoG gave the Beige Bank, at least, 10 days within which to rectify some of the findings that the BoG made against the Beige Bank.
A. That is not so. Bank of Ghana indicated to the bank that it had up to 10th August to pass the adjustments that were reported in the letter, but not to rectify for findings.
Q. Per your witness statement at Paragraph 14, you indicate that a day after the letter of 31 July, 2018 was written to the bank, the bank’s license was revoked?
A. That is so. But on 30 July, 2018, BoG received a letter from the Beige Bank signed by the CEO indicating that there was going to be a run on the bank by 31 July, 2018, and the letter was requesting for liquidity support from the BoG, and it was going to affect other financial institutions, because the bank was not meeting withdrawals of depositors, and that Bank of Ghana should intervene or else the bank cannot function again.
Bank of Ghana has apart from regulating and supervising the banks, has [a] responsibility to ensure that there is an orderly exit of any bank that is failing. The letter received by the Bank of Ghana informed the Bank of Ghana of an emergency situation upon which the Bank of Ghana acted by revoking the licence of the bank.
Q. The BoG revoked the bank’s license on the strength of the accused person’s letter, because they believe what the accused person wrote?
A. That is not so. The report declared Beige Bank insolvent, which means the assets of the bank was less than the liabilities of the bank. The bank was not able to meet depositors’ withdrawals so Bank of Ghana revoked the licence of Beige in accordance with Act 930.
Q. If the report of the Bank of Ghana was the reason for the revocation of the licence, can you explain why on 31 July, 2017, the BoG wrote to the bank; you did not just revoke the licence but rather directed it to make specific adjustments?
A. My Lord, the report declared Beige Bank insolvent, which the law requires that insolvent banks should be revoked, and in addition to that the bank also wrote a letter to call on Bank of Ghana to act in order not to create crippling effects on the liquidity challenges on banks. Act 930 requires the BoG to revoke the licence of a bank if it is insolvent and having liquidity challenges in an emergency situation.
Q. If emergency was the Bank of Ghana’s reason, why did the Bank of Ghana not, by the letter of 31July, 2018, just revoke the licence of the bank, but rather gave it [an] additional 10 days to make specific adjustments?
A. It is both the insolvency as well as the emergency situation which informed the Bank of Ghana to revoke the licence of the bank. Because of the emergency, the Bank of Ghana could not wait for the 10 days.
Q. As at the 31 July, 2018, when the Bank of Ghana wrote this letter, it had received the bank’s letter of 30 July, 2018. Is that correct?
A. Yes.
Q. A reading of the Bank of Ghana’s 31 July, 2018 letter will confirm that no reference was made to the bank’s earlier letter of 30 July, 2018?
A. That is so. Bank of Ghana sent the letter of the report to Beige Bank on 31 July, 2018, but before then the report had been discussed with the CEO on 25 July, 2018, so the final report was just submitted to the bank on 31 July, 2018. However, Beige Bank informed Bank of Ghana on 30 July, 2018, that there was going to be a run on the bank by 31 July, 2018.
In [the] revocation of a bank’s licence, Bank of Ghana will need some time to prepare in order to allow the bank exit orderly, and not to create systemic problems affect to other bank, so that was why Bank of Ghana revoked the license on August 1, 2018.
Q. So, by reference to your testimony that you just gave, the Bank of Ghana thought it was sufficient time between 31 July, 2018, when it wrote to the bank to make specific adjustments, and the 1 August 2018, which was just to revoke the licence of the bank, it was sufficient time to make the orderly transition. Is that so?
A. My Lord, Bank of Ghana informed Beige Bank of its findings, which had declared the bank insolvent, so the bank is already insolvent. As to the adjustment to the books, it will only inform the bank that it is insolvent. Once a bank is insolvent, Bank of Ghana did not need to wait for adjustments to be passed before revoking the licence of the bank.
Q. From your testimony in P6 and 7, the Bank of Ghana had upgraded the bank’s licence status from savings and loans to universal bank. Is that correct?
A. Yes.
Q. Can you tell the court what requirements a savings and loans company must meet before the Bank of Ghana would upgrade it to universal bank?
A. The Bank of Ghana has a very stringent bank licensing procedures before any license is issued for a bank to be established. Bank of Ghana requests for particulars of the shareholders, directors, key management personnel, and review to ensure that they are fit and proper to manage a bank.
Bank of Ghana requests for feasibility reports, which include financial projection for five years, business plan, and these documents are reviewed to ascertain the viability of the banking business. There is also a capital verification process, which ensures that the bank to be licensed meets the minimum capital requirements.
Q. The document shown to you, dated 25 July, 2017, is a letter from the bank to the BoG?
A. That is correct.
Q. The introduction talks about the steps of the approval of the status of the bank as a universal bank?
A. Yes.
Defence: I want to tender the document.
(Document tendered in evidence)
Q. This letter addresses two main issues related to the licensing of the bank to operate as a universal bank. These are the launch of full operations and its deposit book strategy. Is that correct?
A. Yes, my Lord.
Q. If you read below the explanations of what is roadmap for the launch of full operation are you will find in items 4,5, and 6 – the rebranding of its officers, launch of Accra operation, and regional operations. Is that correct?
A. Yes, my Lord.
Q. If you look at the second page of the document, in the last paragraph, the first sentence informs the BoG that there was likely to be a steep decline in the bank’s deposit book following the upgrade of the bank to a universal bank. Is that so?
A. Yes, my Lord. It is so.
Q. The next sentence then informs the BoG of the strategy it will adopt to deal with the situation, which includes the gradual reduction in the bank’s deposit rates. Is that correct?
A. Yes.
Q. On 22 February, 2018, from the bank to the BoG?
A. Yes.
Q. The first sentence refers to a letter dated 25 July, 2017?
A. Yes.
Q. In the banking industry, savings and loans companies deal with their customers at higher interest rates than universal banks?
A. I do not have any information in that respect.
Q. In your 23 years of work at the Bank of Ghana, are you aware that a number of the universal banks operate within a corporate group?
A. Yes.
Q. Within the banking rules are there any rules which prohibit any individual which form part of a corporate group?
A. We call this related party transactions, and the law has made a limit on exposures to related parties.
A. Related party transactions are generally not prohibited?
A. That is so.
Q. In normal banking business funds available to the bank come from various sources?
A. That is so.
