Capital Bank (Ghana) Collapse: A Story of Regulatory Failure

The Capital Bank (Ghana) collapse is a stark reminder of the consequences of regulatory failure. In 2017, the Bank of Ghana revoked the licenses of Capital Bank and UT Bank, citing severe liquidity crisis and insolvency.

The Bank of Ghana had given Capital Bank a lifeline of GHS 250 million in 2015, but the bank still managed to accumulate a staggering GHS 850 million in debt. This is a clear indication that the bank's management was not transparent in its financial dealings.

The collapse of Capital Bank had a ripple effect on the entire economy, with over 1,000 workers losing their jobs. The bank's collapse also led to a significant loss of public trust in the banking system.

Capital Bank was founded by William Ato Essien on 29 October 2009 as a microfinance company.

The company started small but grew rapidly, with its deposit base reaching 36.06 million cedis and total asset size of 47.18 million cedis by the end of 2010.

In 2013, First Capital Plus Bank, as it was known then, had a deposit base of 211.11 million cedis and total assets of 286.80 million cedis.

The Bank of Ghana stated that FCP had a market share of 16% of the advances of savings and loans companies and 19% of the sector total assets at that time.

The bank employed 355 people and had 15 branches covering five regions in 2013.

After a six-month provisional period, the bank was given a full license on 4 December 2013 and became officially known as First Capital Plus Bank.

The firm later re-branded to Capital Bank in 2015, marking a new chapter in its history.

Capital Bank's growth was impressive, but its success was short-lived, as the Central Bank of Ghana revoked its license in 2017 due to insolvency.

Take a look at this: Cbn Has Revoked the Banking License of Heritage Bank.

At Capital Bank (Ghana), the operations are streamlined to cater to the diverse needs of their customers. The bank operates with a robust network of over 30 branches across the country.

Their banking hours are from 8 am to 4 pm, Monday to Friday, and 8 am to 12 pm on Saturdays, ensuring customers have ample time to conduct their transactions.

Capital Bank (Ghana) offers a range of services, including current accounts, savings accounts, and loan facilities, making it a one-stop shop for all banking needs.

Their online banking platform is user-friendly, allowing customers to manage their accounts, pay bills, and transfer funds from the comfort of their own homes.

The bank's customer service is available to assist customers with any queries or concerns they may have, ensuring a seamless banking experience.

Capital Bank (Ghana) also offers mobile banking services, allowing customers to access their accounts and conduct transactions on the go.

Their ATMs are strategically located across the country, providing customers with easy access to their cash whenever they need it.

The bank's commitment to innovation is evident in its adoption of digital technologies to improve customer experience and operational efficiency.

A fresh viewpoint: Banks and Banking Services

Capital Bank (Ghana) has faced regulatory issues in the past. The bank was placed under receivership by the Bank of Ghana in 2015 due to its poor financial health.

One of the main reasons for this was the bank's failure to meet the minimum capital requirement of GHS 400 million. This was a major regulatory issue that led to the bank's receivership.

The Bank of Ghana took over the management of the bank to protect depositors' interests and ensure the stability of the financial system.

A fresh viewpoint: List of Financial Institutions in Ghana

The International Monetary Fund's (IMF) recommendation played a significant role in the revocation of UT Bank's license.

In 2017 and 2018, the Bank of Ghana revoked the licenses of seven banks, including UT Bank, due to regulatory breaches.

As part of the IMF's prior actions, the Governor of the Bank of Ghana, Dr. Ernest Addison, initiated a clean-up of the banking sector to restore public confidence.

The IMF's recommendation led to the revocation of UT Bank's license, a decision that shocked many Ghanaians.

Between August 2017 and August 2018, seven banks had their licenses revoked, including Beige Bank, uniBank, UT Bank, and Capital Bank.

The Central Bank accused the management of these banks of violating Ghana's banking regulations, leading to the revocation of their licenses.

Capital Bank's former CEO, William Ato Essien, could have been prosecuted without the government revoking the bank's license. This is according to former Deputy Minister of Finance, Kweku George Ricketts-Hagan.

The bank's financial challenges were severe, including non-performing loans, toxic assets, and insolvency. Mr. Ato Essien admitted to these challenges during his testimony.

Ato Essien was convicted of stealing over GH¢90 million of Bank of Ghana's liquidity support. He was required to pay GH¢60 million, but only managed to pay GH¢5 million before the deadline elapsed.

The prosecution of Ato Essien could have been carried out without closing down the bank, says Ricketts-Hagan. This is because the prosecution of the bank's founder would serve as a deterrent to others, he believes.

The Attorney General's office was able to recover GH¢37 million from Ato Essien before he was jailed for 15 years. This is one of the biggest amounts recovered from a criminal case under the Fourth Republic.

Capital Bank (Ghana) has a significant sponsorship deal with the Ghana Premier League. The bank became the headline sponsor in 2014.

The sponsorship agreement was a five-year deal worth ten million dollars. This deal was a welcome boost to the Ghanaian league, which had been without a title sponsor for over four months.

The bank agreed to pay the Ghana Football Association two million dollars per year until 2019. This payment structure will provide a stable source of income for the league.

The first payment of five hundred thousand dollars was made on 2/5/14. This marked the beginning of a new era of sponsorship for the Ghana Premier League.

This deal was hailed by Elvis Afriyie Ankrah, Minister of Youth and Sports of Ghana.

Additional reading: Five Star Bank Digital Banking