Former Director of the Universal Merchant Bank (UMB), George Smith-Graham has announced his intention to appeal the recent High Court decision that upheld the Bank of Ghana’s (BoG) disapproval of his appointment as board chair of the bank.
In a press release, Smith-Graham expressed respect for the court’s decision but highlighted significant concerns regarding the BoG’s conduct and its broader implications for the banking sector.
Smith-Graham, formerly an independent director at UMB, clarified that his election as board chair was properly communicated to the BoG.
“Unexpectedly, the BoG issued a letter revoking approval for my appointment as an independent director without any prior notice to me or the Bank. This was surprising because the point of difference between the BoG and the bank concerned whether an already approved independent director required a “no-objection” from the BoG before being appointed and serving as the chairman of the Board of a bank.”
Despite UMB’s position, the BoG revoked its approval of Smith-Graham’s appointment as an independent director.
He described this action as surprising and indicative of BoG’s overreach, arguing that it threatens the stability of the banking sector by creating fear and uncertainty among industry professionals.
“My lawyers have advised me, and I believe this to be true, that the BoG cannot use a letter to amend the requirements of Act 930 and the Corporate Governance Directives, 2018 as it sought to do in this case. This overreach by the BoG is not only unlawful but also threatens the stability of the banking sector. The BoG has been abusing the approval process for directors and key management personnel, instilling fear among industry professionals,” he added.
Smith-Graham also questioned the High Court’s failure to address the critical legal issue of whether the BoG could impose additional requirements through administrative letters not contained within Act 930 or the Corporate Governance Directives.
He warned that such practices undermine corporate governance principles and restrict the authority of bank boards.
He called on stakeholders to support efforts to maintain a fair and just regulatory framework, emphasizing that the outcome of this appeal will have significant implications for the governance and operational integrity of the banking sector.
The High Court upheld the Bank of Ghana’s (BoG) decision to disapprove George Smith-Graham’s appointment as the board chair of Universal Merchant Bank (UMB).
The court, presided over by Justice Nana Brew, dismissed Smith-Graham’s application for judicial review.
This decision follows BoG’s July 2022 directive requiring commercial banks to obtain prior approval for key appointments.
UMB had appointed Smith-Graham as board chair without BoG’s “No Objection” and, despite BoG’s warning, refused to seek the necessary approval.
Consequently, BoG revoked Smith-Graham’s appointment under the Banks and Specialised Deposit-Taking Institutions Act.
Decision of the High Court
Giving judgment in favour of BoG, the Court stated that the purpose of Act 930 was to enhance the supervisory powers of the BoG to ensure sanity in the banking sector.
The Court considered Section 102 of Act 930 and was of the view that the section conferred wide powers on the BoG to remedy any violation of its laws and regulations by banks and specialised deposit taking institutions and that the BoG was entitled to exercise this power after receiving information on the breach.
The Court therefore held that the contention by the applicant that the BoG could not revoke the appointment of a director of a bank, which had violated its laws unless it had given the director a hearing was untenable.
The Court further stated that Section 102 (3) of Act 930 extended the remedial action that may be taken by the BoG to include the removal of a director.
The Court found further that the exchange of letters between the parties showed that the BoG gave the Applicant and UMB a hearing.
In the view of the Court, the applicant, who was acting both as a director and the Chairperson of UMB could not feign ignorance of the correspondence between the parties.
The Court finally held that the Companies Act, 2019 (Act 992) does not fetter the broad powers given to BoG under Act 930 to remedy the breach of its directives.
The Court added that Act 930, which is the law specifically regulating the conduct of banks, takes precedence over the general provisions of Act 992 regarding the removal of directors by BoG.
The Court therefore dismissed the application on grounds that it was unmeritorious and that the applicant was unable to establish that the BoG’s power was exercised corruptly or with an evil intent in an irrational, capricious and unreasonable manner.