Sierra Leone: Rokel Bank didn’t comply with some provisions of Banking Act –Audit Report

By Stephen V. Lansana

Rokel Commercial Bank (RCB) did not comply with some relevant provisions of the Banking Act of Sierra Leone, including the single obligor limit, aggregate exposure limit, local liquid asset ratio, and capital adequacy deficiency, according to an independent audit report.

Presenting the audit report at the 45th Annual General Meeting held in Freetown, partner of KPMG, Derrick Kawaley, said on the single obligor limit the Bank consistently breached this condition for all significant customers, and as a result of the accumulated loss position of the bank substantially, all the lending portfolio were above the single obligor limit prescribed by the Banking Act.

“As at December 31, 2015, the bank breached the regulations of the prudential guidelines for commercial banks as its local liquid assets ratio of 66.6 percent fell below the statutory minimum of 75 percent,” Kawaley said, adding that the Bank’s non-performing loans to total loans ratio of 74 percent exceeded the tolerable ratio of 10 percent by 64 percent.

KPMG noted that the issued share capital of the bank as at December 31, 2015, was Le38.1 billion. “However, as a result of the accumulated loss position reported by the bank, the net equity of the bank was eroded and fall below the statutory minimum of Le30 billion, as it recorded Le0.185 billion as net equity to the bank.”

Kawaley said that the bank’s minimum capital adequacy ratio and core capital ratio were not met as it recorded capital adequacy and core capital ratio at 11.11 percent, respectively. “They were below statutory requirements of 15 percent and 7.5 percent respectively.”

He added that due to the violations of the Banking Act, the bank is subject to further regulatory considerations as required by the Banking Act and Banking Regulations.

He stated that the financial statements give a true and fair view of the financial position of RCB-SL Limited as at December 31, 2015, and of its financial performance and its cash flows for the year then ended in accordance with international financial reporting standards and the requirements of the Companies Act of Sierra Leone, the Banking Act, and the Banking Regulations of Sierra Leone.

According to the report, as from December 31st,2013, out of bad and doubtful debts totaling Le 144.34 billion, only Le 8.06 billion had been recovered, a proportion considered being very insignificant for the overall bad and doubtful loans/ advances exposures of the bank.

“The bank has set up special debt recovery committee in 2016 to maintain a list of properties available for sale, advertise the properties available for sale, establish a procedure to make the committee the official reference point, negotiate every sale of properties concerned,” the report stated.

The audit report stated that the objective of the special debt recovery committee is to ensure that the bank maintains advances within the limit of Le 300 billion as required by the Banking Regulatory Body, (Bank of Sierra Leone), and also to monitor the process of debt recovery/collection.