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Overexposure and bad management practices are responsible for the dire straits in which Merchant Bank Ghana (MBG) finds itself, the Majority group in Parliament has said. Addressing a press conference in Accra, the Leader of the Majority, Dr Benjamin Kumbuor, said MBG, established in 1972 by the Government of Ghana, was a healthy bank until 2002 when the leadership began engaging in practices inimical to its growth. He said between 2002 and 2008, the loans portfolio of MBG shot up from GH�37 million to GH� 318 million. By November 2013, he said, the top 25 customers of the bank together owed it more than GH�348 million. Due to banking privacy and non-disclosure rules, he declined to provide the details of the companies that owed the bank but indicated that � it would be interesting to know the top 24 companies that owe MBG and the known political affiliations of the people behind the companies.� �By 2007, it had become clear that the state of health of the bank was not good. The bank has consistently failed to meet the new minimum capital of GH� 60 million and the minimum capital adequacy ratio of 10 per cent as set by the Bank of Ghana. There was overexposure of MBG and liquidity was a problem and this was compounded by corperate governance challenges. While other banks in which SSNIT had investments posted dividends over the period, MBG consistently failed to post any dividend. On the contrary, SSNIT continued to recapitalise the bank to prevent it from total collapse, By 2011, SSNIT had recapitalised MBG by over GH� 43,800,000 and management changed several times. The board of SSNIT sought strategic partnership to turn the bank around. It was at this point that FirstRand Bank from South Africa expressed interest in acquiring 75 per cent shareholding in MBG,� he said. Providing the essential terms of the offer by FirstRand Bank, Dr Kumbuor said FirstRand Bank was not interested in handling the recovery of the loans of MBG. Essentially, he said, the Merban Asset Recovery Trust (MART), a subsidiary of MBG established to recover assets of MBG, was required to recover the assets of the bank in the form of loans amounting to GH� 330 million. SSNIT was to take the �bad bank� and make arrangements with UT Financial Services to recover the debt. FirstRand Bank, by their valuation, had concluded that MBG had a negative value if one combined the difficult-to-recover loans under MART and the good loan portfolio and other assets of MBG. According to him, FirstRand offered to buy the good loan portfolio and other assets of MBG for GH� 140 million but, before that, as a condition precedent, SSNIT and SIC were expected to inject GH� 240 million; comprising the cost of the bad debts, the cost of the head office of MBG, a first injection to raise the capital adequacy ratio to 10 per cent and a further injection of approximately GH�12.5 million to raise the same capital adequacy ratio to a new high of 14 per cent. Their offer to the existing shareholders, he further added, was to give them 25 per cent stake after they had made the necessary capital injection. �Simply put, the existing shareholders, on a net basis, would have had to inject approximately GH� 100 million to actualise this offer; and per the terms of First Rand�s offer, there was no option for SSNIT and SIC to use any recoveries to acquire further shares in the bank, post-acquisition. Subsequent negotiations yielded an agreement to allow SSNIT to acquire not more than five per cent additional shares with any recoveries of MART assets,� Dr Kumbuor said SSNIT, in negotiations that spanned several months from August 2012 to June, 2013, was unable to accede to the terms of the offer. SSNIT and FirstRand, he added, jointly issued a statement to terminate the transaction. That, he said, was at the instance of FirstRand Bank to forestall reputational damage. He intimated that SSNIT subsequently publicly announced a call for expression of interest and indicated that FirstRand could participate in it. UT Bank, Sabre Advisors FZC UK and Fortiz submitted various expressions of interest which were evaluated by KPMG, the transaction advisors, he said. After the receipt of the KPMG Report, SSNIT decided to offload their shares in MBG to Fortiz, subject to Bank of Ghana approval. Bank of Ghana subsequently granted approval for the transaction to take place,� he said. Providing details of the Fortiz deal, he said the company was expected to inject GH�90 million in a first round to take up subscription of the shares of MBG; take on both the �good bank and the bad bank combined�; commit to pursue bad debt book and split any recoveries in the ratio of 70:30 to SSNIT/SIC; allow SSNIT and SIC to use recoveries to acquire further shares in the bank; present a turnaround strategy to be assessed and approved by the Bank of Ghana and inject a further GH�50 million within six months of takeover. �It is clear from the above that SSNIT and SIC did not flout any regulation and there was full transparency in this transaction, and the interest of the working people of Ghana was better served than throwing more workers� contribution to a leaking bank,� he said.