Rescued banks get 4 months recapitalisation ultimatum

Rescued banks get 4 months recapitalisation ultimatum

The Central bank of Nigeria (CBN) has given rescued lenders four months to reach recapitalisation deals with new investors or face possible liquidation.

The Deputy Governor, Financial System Stability (FSS), Kingsley Muoghalu, while briefing reporters in Abuja on Tuesday, said that "by September 30, the Apex bank would withdraw all interbank guarantees for the rescued banks, pull the planks and hand them over to Nigeria Deposit Insurance Corporation for liquidation.

He said that the CBN had sent a clear message and was conscious of its responsibilities.  “We have allowed the shareholders and their directors to negotiate and in light of deliberate delays I state clearly that the CBN will use all options to stablise the banks,” Moghali said.

Merger deals

Four of the banks, Afribank, Finbank, Intercontinental Bank and Union Bank  have already signed merger deals.Two more Banks - PHB and Oceanic Bank - have held talks with suitors but have so far been unable to agree commercial terms.

Nigeria's Central Bank, in 2009, injected four billion dollars into nine lenders deemed by auditors to have become so weakly capitalised that they posed a risk to the entire banking system in Africa's second-biggest economy.

An asset management company, AMCON, has been set up to restore them to zero shareholders' funds, but new investors have been sought to bring them up to minimum capital adequacy.

New banking model

Mr Moghalu said that all banks, under the new banking model, have been directed to focus on narrow banking to enhance stability and to give the Apex bank a better outlook on monitoring them.     
    
The Apex bank has also given the approval in principle to nine banks as international and national banks under the new model. The banks are Access Bank, Guaranty Trust Bank, Skye Bank, Zenith Bank, Fidelity Bank, First City Monumental Bank (FCMB), First Bank, United Bank for Africa (UBA), and Diamond Bank.

Out of these banks, UBA, First Bank, FCMB and Stanbic IBTC Bank would be allowed to work as holding companies.

He stated that approval had also been given for Citi Bank, Ecobank, standard Charted Bank, Unity Bank and Stanbic IBTC Bank as national banks while Equitorial trust and Wema bank will comply with regional license.

The Deputy Director said that all banks were expected to diverge from none banking services as from MAY 2012 with all their subsidiaries turning to holding companies. He also said that by June 2013, no bank or financial holding company would be allowed to engage in real estate business or operate a register.  

He noted that the worst is over for banks in Nigeria as the new proactive rules being put in place by the regulator would sanitise and stabilise the banking system.

With the new model, investors and customers funds will be secured resulting in an improved economy.

Williams