Ring! Ring! Ring!. Rang the intercom in my office. I am not into the supernatural, but on this occasion, I could almost predict with certainty the person at the other end of the line.
Despite the policy of the company that a phone must be answered before the third ring, I was reluctant to pick the call on this occasion even though it rung more than ten times.
As if a switch had gone off in my head, I rushed to check if I had put my mobile phone on flight mode. As I reached out for the handset, I immediately felt it vibrating…the name: “M.D. MOBILE NUMBER” appeared on the screen. Too late. I had to answer the call. Lawyer are you in the office? I answered in the affirmative. Kindly come up to my office now.
I literally dragged myself to the executive floor of the Bank. The executive floor of the Bank is a section of the Bank which I avoided even on a good day. Two simple reasons account for this.
It’s the floor which has the offices of most of the Executive Committee Members of the Bank (“Exco” as we call them”) and the office of the Company Secretary.(My Boss or in modern terminology, my Line Manager).
The Managing Director’s Secretary ushered me into a meeting where the Bank’s Managing Director, Head of Corporate, Head of Risk, Head of Credit Administration, the Company Secretary and an unknown face, which I believed was that of the customer (my bet was right) and the relationship officer of the customer, who had left my office barely twenty minutes ago were already seated. I was not surprised that the customer and the relationship officer had been able to assemble within such a short time, the Bank’s entire Exco to a meeting, save the Head of Retail Banking who was on a sick leave.
My singular charge was read out to me:
Count 1: The Executive Committee and the Board of Directors of the Bank, exceptionally approved a twenty million facility for one of its twenty largest customers. You as the Head of the Bank’s Legal Department, have willfully and deliberately refused to sign off the credit file in order for the loan to be set up by the Credit Administration Department of the Bank.
My defence was a simple one. “In line with the Bank’s policy, the relationship officer is yet to submit to the Legal Department for review the title documents of the property being used as security, which is to wit the customer’s warehouse situate at Kpone,Tema.This is a condition precedent to sign off. The Managing Director knowing twenty million was beyond his limit to approve exceptionally, coupled with the fear of the Bank having an unsecured facility sitting in its books, caused the meeting to end in less than ten minutes and informed the customer to ensure that the title documents are released directly to the Bank by his former bankers. What a close shave!
For those who have worked in the Legal Department of a Bank before, the clashes between the Profit Making Departments of the Bank (those tasked with generating revenue for the Bank) and the Bank’s Back Office Departments (those that ensure that the Bank’s systems are in place and its interest guarded) are imminent and quite common.
The Profit Making Departments rake in the business, grows the books of the institution and ensure that profits soar. The Back Office Departments such as the Legal Department, ensure that the Institutions’ interest is safeguarded.
As part of the work of an In-House Lawyer in the Legal Department of a Bank, is an aspect of the work called “Legal Disbursement”. This is in reality, Legal Due Diligence. In line with a Bank’s practise and standard procedures such as its Operating Manual and Credit Policy, certain documents or conditions must be in place before a Legal Officer signs off a Checklist called a Disbursement Sheet. When this is done, a customer’s loan is finally set up.
In as much as a Bank’s internal procedures prior to disbursement may be cumbersome, may seem to frustrate the customer and may lead to inordinate delay, they have been put in place based on regulatory directives, policy and institutional history. It is better to have every document in place prior to disbursement, than to have all but one document in place prior to disbursement. When a customer is in default, I am often amazed by the stories they cook up in an attempt to avoid their just debt. Some swear they never applied for the facility. After utilizing the disbursed funds, some claim the Bank did not advise them to seek independent legal advise.
I will never forget the admonition by my former line manager: “You can be everyone’s darling, however wait till you flout a procedure of the Bank”.
Where a staff of the Bank flouts a procedure of the Bank, the punishment for same is well enshrined in the Bank’s Rules and Conditions of Service. It may range from a query, a warning letter, suspension to outright dismissal.
From my experience, I give the following advise to in-house lawyers of Bank’s when it comes to Legal Disbursement.
- Ensure you follow the Bank’s Credit Committee Decision on a credit, to the latter.
- Where the Facility is beyond the limit of the Credit Committee, look out for the Board of Director’s Decision on the Facility and follow it to the latter.
- Ensure that the Legal Disbursement is conducted in line with the Bank’s Credit Policy or the Operating Manual of the Bank’s Legal Department.
- Be wary of time bound and urgent requests to sign off a credit file. Those are the files one must double check and take time to sign off. (Despite the urgency).
- Where under pressure, one can cursorily look at a credit file, send a holding e-mail on general queries, to keep the requesting department at bay. Time should be created to do an enhanced due diligence on the file subsequently.
- One should be wary of files where the security is already in place or is a continuing security. The security must be double-checked to ensure it is indeed in place, valid and meets the Bank’s current pre-disbursement requirements.
- An organization’s policy may allow gifts to be taken. However one should be wary of gifts from credit officers or a customer, that are given solely to facilitate or influence the signing off of a credit file that does not meet the Bank’s internal requirements.
- Where despite the conditions precedent to disbursement, Management insists on a file being disbursed, the in-house lawyer should request that an email is sent copying those that matter. I will advise that copies of such mails or disbursement sheets are photocopied and kept in ones personal file at home or better still stored in the cloud. They may come in handy one day.
- A lawyer must be candid and courageous. Where signing off a file will lead to dire financial consequences for the Bank as a whole, a lawyer should be bold, look Management in the face and say no or refuse to be part of any fishy deal. As the saying goes “the truth will always out”.
- In exceptional circumstances, the lawyer should escalate credit related issues to the Board of Directors of the Bank or a regulator such as Bank of Ghana.
- Where the whole Bank is complicit, one must be prepared to resign from the Bank. (I have always advised my lawyer friends working in-house in Banks not to forget that they are professionals). A Bank that does not live up to its mission statement or core values, is a sinking ship. You either jump out or sink with the ship!
- Lastly, I advise lawyers working in a Bank. not to borrow to the hilt. They should save as much as possible, have wide networks, keep in touch with friends in private practise and be abreast with changes in the law. It is easier to transition from corporate practice to private practice when some of these measures are in place.