Saturday, 21 February 2009

Bank of Ghana says NIB Boss must be sacked

By Frank ADDO

Lawyers for the embattled Managing Director of the National Investment Bank (NIB), Daniel Gyimah, have managed to secure his release from custody, but his problems are not over. The Bank of Ghana has in a scathing assessment of the operations of the NIB recommended his removal from office because his management of the financial institution has been unsatisfactory.

Gyimah has been arraigned before court by the Bureau of National Investigations (BNI) on a provisional charge of willfully causing financial loss for unilaterally guaranteeing a $60 million facility for Eland International.

In a document evaluating the financial situation of the NIB and dated February 10, 2009, the Bank of Ghana concluded that Daniel Gyimah failed to effectively and efficiently manage the NIB “especially with regard to liquidity management of the bank and credit delivery.”

The Bank of Ghana report which has surprised some key players in the banking industry revealed that NIB’s total contingent liability as at December 2008 was GH¢79.6 million, a whopping 160% of its net worth and which went “over and above the prudential level of 100%”.

“These contingencies exclude the $60 million unrecorded, crystallized promissory notes”, the report added.

In recommending that Gyimah steps aside for a turnaround manager to steer the bank, and allow for an in-depth regulatory review of the bank's operations, the Bank of Ghana disclosed that the NIB has been relying on heavy borrowing from the interbank market and the Central Bank, on average between GH¢34 and 35 million daily.

According to the Bank of Ghana, an undisclosed contingent liability of $60 million based on promissory notes crystallized on January 29, 2008. The notes were found to have been issued “sometime in 2007” and the Bank’s preliminary findings found the Managing Director as the person behind the transaction.

Contrary to banking regulations, there were no records of the transaction and key management members and the Board were also not informed of the guarantee. According to the BoG, when Gyimah was contacted he was evasive and later promised to submit a report which he is yet to do.

"The immediate past Chairman of the Board of NIB has also denied any knowledge of a transaction involving a USD60 million promissory note. Although staff denied knowledge of the transaction, copies of two swift messages received at the bank (in our possession) bore minutes of the Head of International Banking and the MD, the former informing and asking for directives and the latter directing confirmation of the authenticity of the transaction to the requesting party, Standard Bank PLC. These confirmations took place on April 7, 2008 and September 4, 2008 respectively" the report noted.

The dailyEXPRESS has learnt that this is not the first time the NIB has guaranteed a facility for Eland International, with informing suggesting that they defaulted in the first instance, leaving NIB to settle the debt as guarantors.

The Bank of Ghana report also revealed that the NIB Board in July 2008, “ratified a management decision to unilaterally reschedule over 4600 overdraft without prior discussions with the borrowers. These non-performing accounts, totaling GH¢58.48 million (21.2% of outstanding loans at end-September 2008) indicate poor credit portfolio management practices.”

As a result of the above, NIB is unable to recover a substantial part of its credit portfolio, especially the 50 largest that are adversely classified. The bank is also repaying back loans used to finance equipment with a foreign credit line which is said to have performed badly.

It further stated that the Managing Director as Chairman of First Ghana Building Company contracted a total of $23 million from two Nigerian banks (Bank PHB and Afribank Nigeria PLC) for proposed acquisition of shares in the company. The liabilities, according to the Bank of Ghana, are still outstanding in the bank's books. In effect, the foreign currency funds have been sold to shore up the bank's liquidity.

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