A US$66 million deffered letter of credit established by the management of Merchant Bank to a state institution for the lifting of light crude oil to support the country’s power generation is causing some stormy waves within the bank’s board.
The controversy stems from the allegation that the facility was issued without due process, an accusation the Managing Director, Mr Peter Illiasu, an experienced banker has flatly refuted, saying the right procedures were followed.
The facility, which was granted to the Volta River Authority (VRA) for the procurement of light crude oil for the generation of electricity, was supported by the Ghana Government’s promissory note issued by the Ministry of Finance.
So far, more than GH¢38 million has been released on behalf of the authority towards retiring the facility on maturity.
The residual amount is being syndicated with participation from other local banks.
But the transaction has stirred some boardroom wranglings within the bank and the disagreements reached its peak when Mrs Marian Banor, Board Chair of Merchant Bank, on September 1 verbally asked the managing director to resign or be fired.
The 48-year-old managing director has since August 30 not reported for work. Accusations levelled against the managing director include allegations that he granted a GH¢500,000 loan facility to himself for the purchase of a house without going through the due processes of loan disbursement.
But Mr Illiasu has flatly rejected those accusations and challenged his critics to provide evidence of a pesewa he granted to himself as a loan.
“It is unethical; it is unprofessional for a banker with these years of experience to bypass the processes and grant loans to myself in such a reckless manner,” he yelled in a telephone interview with the Graphic Business.
“I am not sure what some people are up to and to come up with such a big lie that cannot pass through any test is what baffles me,” adding that “let them proof it and I’m not sure they will find any shred of evidence or document to support their claim”.
Mr Illiasu will not comment on his relationship with the board chair except to say “we have a good working relationship, she is a nice person”, adding that “somebody might have have misinformed her”.
Checks from a highly placed source at Merchant Bank has corroborated Mr Illiasu’s plea of innocence in the award of a loan to himself.
“I cannot confirm that the Managing Director awarded loans to himself, in fact we do not have those record in our loan books and I do not know where those stories are coming from”, the source said.
“But if he has granted loans to organisations, what was wrong with that, it is within his right”, the source said, quoting the bank’s credit policy on chapter three, section seven, sub-section (H) that mandates the managing director to approve excesses.
The banks’ financial statement sighted by the Graphic Business shows that, the bank which was a tier two bank when Mr Illiasu joined it in 2009, has since moved to a more prestigious tier one bank.
This means that the bank is more solvent with a huge capital base and has the capacity to conduct huge transactions and bigger investment and strategically positioning itself for the oil business.
According to the bank’s financial statement, the bank’s total deposits jumped from GH¢391,561 in September 2009 to more than GH¢723,387 in July 2010, representing an 84.7 per cent growth.
Current accounts deposits also increased from GH¢66,790,328 in 2009 to GH¢215,246,460 in July 2010, which also represents a 222.2 per cent growth over the period.
The banks’s savings accounts books also saw a 58 per cent growth from GH¢14,794,999 in September 2009 to GH¢23,431,921 in July 2010, while the loan deposit ratio was reduced from 106 per cent in September 2009 to 57 per cent in July 2010 much more than the industry average of 70 per cent.
Though the Managing Director has reportedly not been at post since Monday August 30, 2010, he maintains he had not resigned or been sacked.
Efforts to reach the board chairperson for her direct responeses proved futile.
Source: Graphic Business