The Court of Appeal has indicated the Bank of Ghana (BoG) revoked GN Savings & Loans' operating licence solely due to insolvency. This decision, according to lawyer Cletus Alengah, did not rely on other alleged breaches. The BoG cancelled the licence in August 2019, as part of a nationwide banking sector cleanup. This new legal development could pave the way for a licence restoration.
Lawyer Alengah, representing Groupe Nduom, stated the BoG specifically cited Section 123 of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930). This legal provision allows mandatory licence revocation only if an institution is insolvent or will become insolvent within 60 days. The BoG previously listed several regulatory and prudential breaches against GN Savings & Loans. These included capital adequacy issues, liquidity problems, and related-party transactions. However, these additional allegations were not the stated legal basis for the revocation.
This ruling brings significant scrutiny to the BoG's 2019 financial sector cleanup. During this period, the central bank revoked licences of many banks and non-bank financial institutions. The BoG stated GN Savings & Loans was insolvent, citing a negative capital adequacy ratio of minus 61%. This was a key factor in its 2019 decision. The BoG also accused the institution of transferring over $62 million to an affiliated US-based company without proper documentation. This context highlights the broader challenges faced by Ghana's financial sector in recent years, aimed at strengthening market stability.
Mr. Alengah explained that the BoG's reliance on Section 123 is crucial. He argued that other breaches, such as capital adequacy violations or related-party exposure limits, fall under Section 16 of Act 930. Section 16 requires the BoG to notify the institution and give it time to fix the breaches before revocation. The central bank did not use this procedure. Mr. Alengah said lawmakers provided specific administrative fines for these types of breaches, not automatic licence revocation. This forms a major part of GN's legal argument.
The Court of Appeal's ruling suggests it accepted the argument that GN Savings & Loans was not insolvent when its licence was revoked. This legal interpretation could set a precedent for other financial institutions affected by the 2019 cleanup. The full text of the Court of Appeal's ruling is not yet public. The BoG's lawyers will likely review the judgment once available. They may then decide to appeal to the Supreme Court or seek a stay of execution. This decision could have significant implications for the future of GN Savings & Loans and the broader regulatory environment in Ghana's financial sector. Market participants will closely watch further developments in this case.