The Bank of Ghana's decision to revoke the licence of GN Savings & Loans was based solely on insolvency. This is according to Cletus Alengah, the lawyer representing Groupe Nduom. The central bank had cited various regulatory breaches at the time of the revocation in August 2019. However, Mr. Alengah argues that these were not the legal grounds for the licence cancellation. A recent Court of Appeal ruling may offer a path towards restoring the institution’s licence. This decision comes nearly seven years after the Ghana banking sector cleanup.
At the time of the revocation, the Bank of Ghana stated GN Savings & Loans was insolvent. It cited a negative capital adequacy ratio of minus 61 percent. Severe liquidity challenges were also a major concern. The central bank also accused the institution of exceeding limits on transactions with related parties. Significant sums, including over $62 million, were reportedly transferred to a U.S.-based Groupe Nduom company without proper documentation. These included liquidity issues and foreign exchange violations.
Mr. Alengah contends that the Bank of Ghana conflated two separate legal processes under the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930). He explains that other breaches, like capital adequacy violations, fall under a different revocation process. This process requires notice and an opportunity for the institution to fix these issues. The Bank of Ghana did not follow this procedure for those alleged breaches. The lawyer stressed that Section 123 of Act 930, which the central bank invoked, only allows licence revocation for insolvency.
Other alleged infractions, such as liquidity problems and foreign exchange violations, carry specific penalties under the law. These penalties include administrative fines. Mr. Alengah stated that lawmakers did not intend for these breaches to automatically lead to licence revocation. This distinction was central to GN Savings & Loans' legal argument before the courts. The Court of Appeal's ruling appears to support the argument that GN Savings & Loans was not insolvent when its licence was revoked.
The full details of the Court of Appeal's ruling are still awaited. Lawyers for the Bank of Ghana will likely review the judgment carefully. They will then decide on next steps, which could include seeking a stay of execution or appealing to the Supreme Court. For now, the Court of Appeal’s decision is the current legal position. It could open doors for efforts to rebuild GN Savings & Loans. The company is expected to hold a press conference next week to address the matter further. This legal battle highlights the complexities of financial regulation in Ghana.