A general view shows traffic along a street in the Democratic Republic of Congo’s capital Kinshasa. REUTERS/Thomas Mukoya Just as the merger of Equity Bank Congo with the country’s second-largest bank, Banque Commerciale du Congo (BCDC), which it agreed to acquire, was getting under way, the bank regulator is putting a spoke in the transaction’s wheel.
Central bank governor Jules Bondombe Assango addressed a letter dated 19 January to the BCDC’s chair of the board detailing his reaction to a previous “memo sent by Mr James Mwangi to the staff of the new entity, Equity BCDC SA”.
Last August, EGH completed the acquisition of a 66.53% stake in the capital of BCDC at a cost of KSh10.4bn ($95m).
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At the end of December, the Kenyan financial services giant – which reported revenue of KSh76bn in 2019 – received the green light to merge its banking network with the newly acquired company, thereby increasing its stake in Equity BCDC to more than 77%.
At this point in time, what that means is that the merger is considered complete from a legal standpoint. Operationally speaking, it is in the final stages.
Nevertheless, the central bank laid into the Kenyan company in a recent missive: “After a thorough analysis, we have determined that the decisions announced by the chair of the board of EGH in his memo to staff were taken unilaterally and do not comply with the legal and regulatory provisions bearing on the corporate governance of financial institutions operating in the DRC.” An issue of procedure
At issue for the authority was an internal memo it obtained in which the Kenyan chief executive had outlined a number of decisions pertaining to the merger proceedings.
The problems identified by the central bank included EGH’s announcement of its plans to “integrate the BCDC’s operations and data into the Equity Group platform”, “set up an initial management committee” and appoint two managing directors, Yves de Cuypers (the current managing director of BCDC) and Célestin Mukeba (managing director of Equity Bank Congo – formerly ProCredit Bank Congo prior to Equity’s acquisition of the lender in 2015). According to a financial analyst who closely follows Africa’s major banking institutions: “These decisions should have emanated from the board and/or the general meeting of the newly formed entity, Equity BCDC, instead of from the chair of the holding […]