GAT Created to Capture Local Banks is Unfair to Shareholders – Prof. Gatsi

Indeed to engage in a major financial sector reform with particular focus on the banking sector is a process.

This process started way back in 2014 with comprehensive diagnosis of the sector leading to detail report.

The scope and scale of the problems identified needed a new framework of law for both the banking and securities industries with the new Securities Industry Act, Act 929 and Banks and Specialized Deposit-Taking Institutions Act, Act 930 in September, 2016.

This the full implementation of these two very important new Acts started in 2017.

By the end of December 31, 2018, a decision was taken to support local banks to meet the minimum capital through the Ghana Amalgamated Trust (GAT).

Discussing banking sector developments and the GAT on a local station in Accra, Joynews on Tuesday January 8, 2019, Prof John Gatsi explained that the idea to support local banks is late but in the right direction.

Prof Gatsi explained that the local banks are being supported because of their long history of providing banking services, nurturing of businesses, job creation and corporate contribution to the growth of the economy.

Among the banks to be supported is Universal Merchant Bank with banking services since 1972.

Prof Gatsi, however questioned the appropriateness of how the GAT was formed without parliamentary approval.

He explained further that contrary to explanation given by the Ministry of Finance about the support, GAT is Created as an investor which has already entered into investment agreement duly signed with the local banks.

GAT as investor is not merely supporting to raise these banks from trouble but to capture the local banks and this maybe described as vulture investment whose end game is to takeover the local banks.

He explained that GAT as an investor will have both ordinary and preference shares and the preference shares will not be cumulative.

This further means irrespective of the conditions of the banks, the investor (GAT) must pay the interest on the investment.

Another serious provision is that GAT has the put option that is to sell it shares at anytime until 5 years.

This will likely to make GAT majority shareholder of these local banks.

Prof Gatsi said the purpose of any governmental support is derived from their past contributions to the economy so as to strengthen them to continue to do so.

Prof Gatsi explained that Prudential, UMB and GN especially which has presence in remote areas of the country deserve some support.

Thus, the purpose of GAT should not be buying out original owners through vulture capitalism.

The unfortunate thing is that the deal was closed in a manner that appeared you sign or you are collapse.

He therefore called on Parliament to show interest in how GAT was created as a public entity but invest in local banks as vulture fund killing private investment of Ghanaians.

He demanded more disclosures and names of the private pension funds and declaration that the package is not a silent takeover of local banks.

Author – Professor John Gatsi

University of Cape Coast Business School

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