The recent court ruling on the revocation of CDH Savings and Loans Company Limited's license by the Bank of Ghana (BoG) has sparked discussions within the financial sector. The BoG has indicated its intention to appeal the decision, citing previous instances where similar revocations were upheld by both the High Court and Supreme Court as part of the banking sector cleanup.
The High Court in Accra overturned the BoG's 2019 decision to revoke CDH's operating license and instead ordered both parties to resolve the issue through arbitration. In his ruling, Justice Brew criticized the BoG's approach, emphasizing the constitutional requirement for fair and reasonable administrative actions. The court deemed the BoG's two-week deadline for CDH to liquidate assets to address its liquidity challenges as "unreasonable and unfair."
The central bank had initially revoked CDH's license due to liquidity issues stemming from the company's failure to sell repossessed collateral, resulting in an inability to meet withdrawal demands from depositors. However, the court ruling did not address the notices given to CDH by the BoG to rectify its Capital Adequacy Ratio, which had fallen below the minimum required for an extended period.
Sources indicate that CDH Savings and Loans failed to respond to the notices issued by the BoG within a reasonable timeframe, despite persistent liquidity challenges with wider systemic implications. The final two-week notice for CDH to sell assets in order to address solvency and liquidity challenges was portrayed as the last in a series of accommodations afforded to the company by the BoG.
The outcome of this case and the BoG's decision to appeal will undoubtedly have implications for the regulatory framework governing financial institutions in Ghana. It underscores the importance of striking a balance between regulatory measures and procedural fairness in addressing issues within the banking sector.
As this situation continues to unfold, it is essential for all stakeholders to closely monitor developments and consider the broader implications for the financial industry. The resolution of this case will contribute to shaping the regulatory landscape and could set precedents for future regulatory actions within the sector.
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