BoG setting dangerous precedent over reasons for collapse of Heritage Bank- economist warns

The Bank of Ghana has been accused of setting a "dangerous precedent" over reasons it gave for the revocation of the license of Heritage Bank by the Head of the Finance Department of the University of Cape Coast Business School, Prof. John Gatsi.

Dr. Ernest Y. Addison, Governor, Bank of Ghana (BoG)

Prof. Gatsi said withdrawing the local bank’s licence on the basis that its majority shareholder, Mr Seidu Agongo, is not “fit and proper” to own a bank because he was being prosecuted by the state in connection with an alleged GHS271 million Ghana Cocoa Board (COCOBOD) fertiliser scandal, which is pending before the high court, is a dangerous precedent to set.

“I think the central bank has not been above board”, he told Accra-based Class FM. “Some of the utterances, especially the one you just played [of the Governor]”.

He continued: “You see, when you are talking about criminal offences, they attract severe punishment. Therefore, ordinarily, you cannot be judging people when you are playing your regulatory role.”

“For example, I don’t have the facts, but is the Governor saying that if tomorrow, all those people who are owning financial institutions, and the next government or whoever is in power decides that: ‘I have a case against any of you, and I’m trying that case in court, because of that, because you’re being prosecuted, [although] you have not been declared a criminal by the court, that is sufficient to withdraw your licence?’”

“I think the precedent we are setting is so dangerous for the country, it’s so dangerous for the financial sector. Of course, he himself [Dr Ernest Addison], indicated that it’s a process, it’s dynamic. [So], what of waiting if the court rules that this person is a criminal and based on that you withdraw the licence. But you have withdrawn the licence expecting that they will rule against him that he is a criminal. So, I think that precedent shows that the Bank of Ghana is not above board.”

According to the governor of the central bank, the universal banking license of Heritage bank was revoked because its sources of financing were not clear.

At a press conference last week, he said original source of finance for the bank is currently a basis of criminal prosecution in court.

He said: “The promoters of Heritage provided evidence to Bank of Ghana at the time of the application for a banking licence to the effect that an amount totaling GHC120.6 million was lodged with a local bank.

"The amount of GHC120 million was transferred to the bank from Agricult (a company wholly owned by Seidu Agongo, a promoter of Heritage) which funds appear to have been derived from contracts awarded to Mr.Agongo by COCOBOD and are currently the basis of criminal prosecution in the High Court of Ghana.

"Meanwhile, it has come to the notice of the Bank of Ghana that the bank has yet to respond to two High Court orders for disclosures relating to these and other contracts affecting the significant shareholder Mr. Agongo."

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