Accra, Ghana – A significant legal development has emerged concerning GN Savings & Loans, nearly seven years after its operating licence was revoked by the Bank of Ghana. A recent Court of Appeal ruling, favouring GN Savings & Loans, could pave the way for the potential restoration of its licence, with the institution’s legal counsel asserting that insolvency was the exclusive ground for the initial revocation, not other alleged regulatory breaches.
Context of the Revocation
The Bank of Ghana (BoG) withdrew the licence of GN Savings & Loans in August 2019 as part of a broader banking sector cleanup initiative. At the time, the central bank cited a litany of alleged wrongdoings.
These accusations included related-party transactions, violations of capital adequacy requirements, liquidity shortages, foreign exchange infringements, failure to publish audited financial statements, and the alleged siphoning of depositor funds to affiliated companies within the Groupe Nduom conglomerate.
In its 2019 statement, the BoG explicitly stated that GN Savings & Loans was insolvent, citing a negative capital adequacy ratio of -61% and severe liquidity challenges, as per Section 123(4) of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).
Legal Interpretation of Revocation Grounds
However, Cletus Alengah, the lawyer representing Groupe Nduom, has contested the BoG’s comprehensive list of alleged breaches as the definitive legal basis for the licence revocation.
Speaking on JoyNews’ “Beyond the Numbers,” Mr. Alengah clarified that the central bank’s legal justification, as presented, was specifically rooted in Section 123 of Act 930. This section, he argued, mandates licence revocation solely on the grounds of insolvency.
“The Bank of Ghana said they were revoking GN’s licence under Section 123. So once they were specific that they were revoking it under Section 123, what it means is that either GN Bank is insolvent or GN Bank will become insolvent in the next 60 days. That is the only reason,” Mr. Alengah stated.
Distinguishing Revocation Procedures
The lawyer further contended that the BoG conflated two distinct legal revocation processes stipulated within Act 930.
According to Mr. Alengah, breaches such as inadequate capital, liquidity issues, excessive related-party exposures, and other regulatory non-compliance fall under Section 16 of the Act. This section mandates a procedural approach involving prior notice to the institution and an opportunity to rectify the identified breaches before any revocation can occur.
“Under Section 16, when there are breaches of capital adequacy ratio, transfers or any breach of regulations issued by the Bank of Ghana, they can revoke your licence, but that procedure requires that they give you notice to remedy the breach and give you time,” he explained.
“The Bank of Ghana did not use that procedure. The Bank of Ghana came under Section 123. Under Section 123, there is only one reason that you can revoke a licence and that is insolvency.”
Penalties for Regulatory Breaches
Mr. Alengah also pointed out that the lawmakers themselves had designated specific penalties for many of the regulatory breaches cited by the BoG, such as administrative fines, indicating they were not intended to automatically trigger licence revocation.
“The lawmakers themselves realised that these are not matters that should lead to revocation of a licence. So they provided punishments for those breaches, which are administrative fines,” he asserted.
This distinction, he maintained, formed a critical component of GN Savings & Loans’ legal defence before the courts.
Implications of the Court of Appeal Ruling
The lawyer suggested that the Court of Appeal’s decision implicitly accepts the argument that GN Savings & Loans was not insolvent at the time its licence was revoked.
“That’s probably why the court came to the conclusion they came to,” Mr. Alengah commented.
While the full written judgment from the Court of Appeal is pending, its current ruling stands as the prevailing legal decision. This development could potentially initiate a process for the rebuilding and possible restoration of GN Savings & Loans.
What to Watch Next
The Bank of Ghana is expected to thoroughly review the Court of Appeal’s judgment once released. Their subsequent decision on whether to pursue a stay of execution and potentially appeal to the Supreme Court will be a crucial point to monitor.
Meanwhile, GN Savings & Loans is anticipated to address the media in a press conference next week, where further details regarding their position and future plans are expected to be disclosed.
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