To totally resolve depositor claims of 347 defunct microfinance firms, 23 Savings and Loans firms and Finance Houses that were being settled with bonds, the government has issued GHS3.56 billion in cash.
According to an announcement by the receiver of these defunct companies, the cash will be available for depositors from Wednesday, September 16 , 2020.
The statement from the Receiver announces that with effect from Wednesday 16 September 2020, affected depositors may contact any branch of Consolidated Bank Ghana Ltd (‘CBG’) of the paying bank to access their newly created cash accounts, originally designated as Commercial Paper (Bond) accounts at the bank.
GHS6.07 billion has already been released in cash and bonds to some depositors of these settled companies.
This left the remaining depositors with around GHS402 million to pay.
Of the GHS6.49 billion required for all eligible depositor claims to be entirely resolved, around GHS3.56 billion of these claims were originally settled with government-backed bonds.
However, there were fears that this strategy, the non-interest-bearing aspect of the five-year bond and the tenor of the five-year bond, “does not make the bond financially appealing, thus causing a considerable loss in the valuation of the arguments against it.”
“Sensitive to these issues and in order to provide the financial system with sufficient liquidity, the Government has provided the Receiver / Official Liquidator with additional cash of approx. GHS3.56billion, “said the release.
Thus, the depositors who used to be charged in the bond will now “receive cash premiums for the Commercial Paper they have already received or are due to them at no discount.”
As part of the financial sector cleanup, 347 microfinance companies were authorised by the Bank of Ghana on May 31 , 2019.
In August 2019 , the Bank of Ghana also revoked the licenses of 23 insolvent firms in Savings and Loans and Finance Houses.
These acts is compliant with Section 123(1) of the Banks and Specialized Deposit-Taking Institutions Act , 2016 (Act 930), which allows the Bank of Ghana to withdraw the Bank or Specialized Deposit-Taking Institution (SDI) license if the Bank of Ghana decides that the institution is insolvent.
Find below the full statement
IN THE MATTER OF THE BANKS AND SPECIALISED DEPOSIT-TAKING INSTITUTIONS ACT,2016(ACT 930)
IN THE MATTER OF THE RECEIVERSHIPS OF 347 MICROFINANCE COMPANIES AND THE 23 SAVINGS AND LOANS AND FINANCE HOUSE COMPANIES
NOTICE OF CONVERSION OF GOVERNMENT BACKED NON INTEREST BEARING COMMERCIAL PAPER (“BONDS”) INTO CASH AT NO DISCOUNT IN RESPECT OF PAYMENTS TO AFFECTED DEPOSITORS OF RESOLVED MICROFINANCE, AND SAVINGS AND LOANS AND FINANCE HOUSE COMPANIES WHOSE CLAIMS HAVE BEEN VALIDATED IN THE RESOLUTION PROCESS
In line with Government’s commitment to protect depositors funds and to shore up public confidence in the financial system, Government made available to the Receiver of the above-resolved companies, as well as the Official Liquidator of the Micro Credit Companies in official liquidation, a combination of cash and Commercial Paper totalling approximately GHS6.49billion to fully settle the valid depositor claims on these institutions.
As the Receiver/Official Liquidator brings the processing and payment of valid depositor claims to closure, a total amount of approx GHS6.07billion has been paid to some depositors of these resolved companies, leaving an amount of approx. GHS402million to be paid to the remaining depositors, to fully settle all valid depositor claims in the resolution process. It should be noted that these claims include validated claims previously assessed by the Receiver/Official Liquidator as Late Submission claims owing to the fact that they were submitted after the extended deadline for the submission of depositor claims in the resolution process.
Of the total amount of approximately GHS6.49billion required to fully settle all valid depositor claims in the resolution process, about GHS3.56billion of these claims in value representing approx 55% of total claims payable are being settled with Government of Ghana backed Non-Interest bearing Commercial Paper (“Bond”), with the remaining approx. 45% in value of claims payable, worth approx. GHS2.93billion being settled with Cash.
The Depositor Payment Scheme set up by the Receiver/Official Liquidator to administer and fully settle all valid depositor claims in the resolution process has largely been successful; however, an area of concern for most of the affected depositors is with the features of the Commercial Paper used to partially settle the indebtedness of these resolved companies to those depositors whose claims were not fully extinguished by the payment of cash to them. These depositors have indicated that the features of the Bond, is non-interest bearing and with a tenor of five years do not make the Bond commercially attractive, thus creating a significant loss in value of their claims to them.
Sensitive to these concerns and in order to provide additional liquidity to the financial sector, Government has made available to the Receiver/Official Liquidator additional cash amounting to approx.GHS3.56billion, equivalent to the total value of the Bond component of funding required to fully satisfy the indebtedness of the resolved entities to their body depositors. It is the expectation that this additional cash of approx. GHS3.56billion will replace the Commercial Paper which has been issued by Government in favour of affected depositors of these companies in resolution.
The implication of the above is that depositors who have either received or are due Commercial Paper in partial satisfaction of their claims will now receive CASH payments at no discount for the Commercial Paper they have either received or is due to them. Please note that depositors who have already discounted all or part of their Commercial Paper will receive a full refund in cash of the discount they suffered.
As a result of this new funding arrangement provided by Government, all valid depositor claims in the resolution exercise worth GHS6.49billion in value are being fully settled in CASH.
Notice is hereby given that with effect from Wednesday 16 September 2020, affected depositors may contact any branch of Consolidated Bank Ghana Ltd (“CBG”) the paying bank to access their newly created Cash accounts which were originally designated as Commercial Paper (Bond) accounts at the bank ie CBG.