Bank of Ghana lends GCB $75m under no valid contractual agreement – Report

A $75-million loan granted by the Bank of Ghana (BoG) to the Ghana Commercial Bank (GCB) in 2009 without any valid contractual agreement became the topic for discussion at last Friday’s sitting of the Public Accounts Committee (PAC) of Parliament.

The BoG granted the cedi equivalent of $25 million and $50 million bridging facility to the GCB under a memorandum of understanding (MoU) on February 19, 2009.

Although the agreement expired six weeks from February 1, 2009, an outstanding balance of the cedi equivalent of $50 million remained unsettled as of December 31, 2010.

According to the Auditor-General’s Report on public boards, corporations and other statutory institutions for the year ended December 31, 2010, there was no new agreement or addendum established with the GCB to extend the terms and conditions contained in the MoU, which expired on March 31, 2010.

“The absence of a valid loan agreement and contracts to govern the facilities could impede the efficient and effective management of the loan portfolio,” it stated.

It added that as the tenure of some of the facilities had not been clearly agreed with the GCB, the recovery of the loans might not occur in a timely manner and might extend unduly, while the BoG was also losing interest on the facility.

Although the Chief Internal Auditor of the BoG, Mr Felix Adu, explained that the bank was in a discussion with the GCB to agree on terms for a new payback, that explanation did not go down well with members of the PAC.

Another issue that came up for discussion was the net debit on the special accounts maintained at the BoG by the Controller and Accountant-General’s Department (CAGD), contrary to the Loan and Fiscal Agency Agreement.

The CAGD maintains receiving accounts and HIPC funds and withdrawal accounts for development projects and as of December 31, 2010 the net position of the two accounts showed an overdrawn amount of GH¢83 million.

That, according to the Auditor-General’s report, indicated that the bank had advanced funds to the government under terms that appeared contradictory to the provisions of the Loan and Fiscal Agency Agreement.

The Auditor-General recommended that where it became necessary for a temporary advance to be granted to the government, the required procedure should be duly adhered to.

Source: Daily Graphic