ABSTRACT

This study investigated the causes of takeovers in Ghana with specific interest in UT and Capital Bank, due to the shock value it created among Ghanaians at the time. The specific goal of this project was to scrutinize the reasons that led to the takeovers of these two Banks and whether the central bank could have prevented the failures of these banks.

The study adopted the quantitative approach to research. The study used ratio analysis. The Data was obtained from the financial statement of both UT and Capital Bank. The period considered was between the year 2012 to 2014. The reason for this range was due to the availability of the financial statements both banks presented to the general public. The findings of the study revealed that both banks had weak indicators which they didn’t improve in the subsequent years and also didn’t follow the statutory regulations and guidelines provided by the central bank when they were in crisis, with regards to the central bank. The lack of proactiveness on their part when both banks showed signs of failure is an issue they have to address. It is my hope that the central bank comes to the aid of banks sooner rather than later.

CHAPTER ONE

INTRODUCTION

            Overview

This chapter introduces the background of the study, problem statement, project objectives, research questions, the significance of the study and how the study was organized.

            Background of The Study

No country’s economy can survive today without a robust financial sector. Among its many importance’s, the  financial  sector  sits   between   savers and   borrowers   it   takes   funds   from savers ( for uexample,  through  deposits)  and  lends  them  to  those  who  wish  to borrow,  be  they  households,   businesses or   governments. One important player in the sector is the bank.

A  bank  is  a  financial  institution  licensed  to   receive   deposits   and give   loans. Banks offer financial services, such as wealth administration, currency exchange and safe deposit boxes. As financial mediators, banks channel funds from savers to borrowers, providing customers with the liquidity they need for investment in productive, lucrative enterprises. By motivating savings and investment, banks also efficiently reduce the loss of capital and boost economic growth (Baah-Nuakoh, 2017). In addition, the banking system facilitates internal and international trade. A great part of trade is done on credit. Banks provide references and assurances, on behalf of  their  customers,  on  the  basis  of  which  sellers  can  supply  goods  on credit. This is mainly significant in international trade when the parties exist in different countries and are very often unidentified to one another. Additionally, the banks serve as alternative gateways for making payments on account of income tax and online payment

of various bills like the telephone, electricity and  tax.  The  bank  customers  can  also  capitalize their funds in various stocks or common funds straight from their bank accounts.

In most countries such as Ghana, the day to day activities of these banks are regulated by the national government or central bank. Bank of Ghana which is the central bank of Ghana was established in 1957 with Alfred Egleston as the first appointed Governor. The bank took over the administration of the currency and in July 1958 delivered its first National Currency the Cedi to replace the old West African currency notes (Bank Of Ghana, 2006)

The Ghana Commercial Bank (now known as GCB)  was  the  first  commercial  bank  in  Ghana. It assumed the role and  purposes  of  Government  bankers  and  began  to  take  over the finances of most  Government  branches  and  public  establishments (Buckle, 1999).  A  new government elected by popular vote in 1957, made a way for  new  banks  to  be  established in the country namely the Ghana Investment Bank as an Investment Banking Institution; the Agricultural Development Bank for  the  progress  of  Agriculture;  the  Merchant Bank for merchant banking; and  the  Social  Security  Bank  to  boost  savings.  These banks were incorporated by legislation between the periods of 1957 to 1965. In conformism with the economic plan of the time all these institutions were combined as state-owned banks.