The High Court’s Human Rights Division on Monday overturned the Bank of Ghana’s (BoG) decision to cancel the operating licence of Ideal Finance Limited.
The High Court’s decision represents a significant win for the now defunct financial institution in its continuous conflict with the top bank.
The court determined that the action was unjustified because the Bank of Ghana had not followed the proper legal procedures before cancelling Ideal Finance’s licence.
Read also: Ghana and Rwanda collaborate on Africa’s first license passporting framework
The court restored the business’s legal standing, enabling it to carry on with its operations.
Bank of Ghana’s financial sector cleanup exercise
As part of its extensive financial sector cleanup effort, the Bank of Ghana terminated Ideal Finance’s license, mostly citing insolvency and weak governance.
The revocation was quashed, though, after the High Court determined that the BoG had not followed all necessary procedures before reaching its decision.
23 financial companies, including Ideal Finance, GN Savings and Loans, First Allied Savings and Loans, Midland Savings and Loans, and Unicredit Savings and Loans, had their operation licences withdrawn by the Bank of Ghana on August 16, 2019.
The central bank defended its broad actions by claiming that these institutions had been given enough time to recapitalise but remained bankrupt.
Read also: Dutch bank launches $4 million initiative to fund startups in Ghana, Nigeria, Tanzania
Bank of Ghana aims to restore stability in the banking system
Restoring stability and trust in the banking system was the goal of the BoG’s financial sector cleanup effort, especially in light of worries about the viability of some banks.
However, several banks and financial institutions were forced to close as a result of the cleanup, which left depositors and other stakeholders in a precarious financial situation.
Even if the Bank of Ghana’s policies were meant to boost the sector over time, impacted institutions and their customers have strongly opposed them.
The success of Ideal Finance’s appeal against the revocation may serve as a model for future court cases, casting doubt on the impartiality and openness of the central bank’s regulatory processes.
The High Court’s ruling to overturn Ideal Finance’s licence revocation may have broader implications for the Bank of Ghana’s future financial sector activities.