Nigerian government takes over three banks

Nigerian government takes over three banks
Hauwa Noroh Ali, Abuja

The Nigeria government has taken over the running of three banks in the country.

The banks are Afri-banks plc, Bank PHB plc and Spring Bank plc.

The Minister of State for Finance, Dr Yerima  Ngama, who announce the takeover  in Abuja, said that  the step was taken after due consultation and represents an important milestone in the process of stabilizing the banks

State of depositors’ funds

He stated that “with the support of the Nigerian government, the Nigerian Deposit Insurance Corporation (NDIC) organized and incorporated Bridge Banks as a means of resolving the problems and deficiencies facing Afri-Bank Plc, Bank PHb Plc  and Spring Bank Plc. “

The banks which have been incorporated by bridge banks would change name from August 10, 2011.

The minister said Nigeria was the first country to resolve such bank problem without closing down any bank or depositors losing their money.

“This is just a technical way of solving a problem of a bank in order to safeguard depositors’ fund as well as ensure that the bank continues in a different form,’’ he explained.

Dr Ngama urged depositors of the affected banks, including the Ministries, Departments and Parastatal Agencies, to continue to transact businesses with the  bridge banks as the process would not in any way affect them.

“The Federal Government is pleased to note that this process has not resulted, and will not result, in the loss of any depositor’s fund, rather it will bring stability to the finance system.”

“In particular, I wish to emphasise that no depositor will lose one kobo,’’

Reacting to why such a decision was taken before September 30 deadline given by the Central Bank of Nigeria (CBN), the minister said the measure was to guarantee depositors' money.

“September 30 is the deadline to withdraw the guarantees the CBN gave all other banks to place money on the banks affected. So, if we allow September to come, it means that all those banks that have placed deposits, interbank money with those banks will now call on the banks.

“What we are doing is an effort to bring stability in those banks so that the banks will continue to provide services without any unexpected effect or reactions from their depositors or the banks that give them money from interbank,’’ he noted.

Guaranteeing stakeholders’ confidence

Meanwhile, in Lagos, the managing Director of NDIC, Alhaji Umaru Ibrahim, explained that the step was taken to restore the confidence of stakeholders in the banking industry

Ibrahim said: “The Bridge Bank option is a veritable tool to enhancing depositors’ protection and promoting confidence by ensuring seamless continuity of banking operation.

“The NDIC will operate the Bridge Banks until such a time that we engage the Assets Management Corporation of Nigeria (AMCON) with a view to capitalising the bridge banks.

“AMCON is expected to open up negotiations with investors, who may be interested in capitalising the Bridge Banks.”

He stated that the assets and liabilities of the three operators had been immediately taken over by the Bridge Banks as part of efforts to ensure that the banks continue to operate under new identities While MainStreet Bank Limited has been licensed to take over Afribank Nigeria Plc. Keystone Bank Limited has acquired the assets and liabilities of BankPHB; and Enterprise Bank Limited, will from today run Spring Bank Plc.

The three bridge banks acquired the assets and liabilities through the purchase and assumption model earlier used by the apex bank under Chukwuma Soludo as CBN governor.

The three banks were among the 10 that failed the CBN stress test conducted in June 2009, following which Wema and Unity Bank have resolved their troubles, just as new core investors- Access Bank have emerged for Intercontinental; Finbank, for First City Monument Bank; Ecobank Nigeria for Oceanic Bank International; while Union Bank have emerged core investor for Union Bank.

Equitorial Trust Bank, he noted, is close to recapitalisation.

The new identities

The executive managements of the affected banks appointed by the CBN on August 14, 2009 have now been transferred to the NDIC. They are now to work with the NDIC, while the brand names cease to exist and are to be replaced by the new identities.

A statement by the CBN also assured the NDIC of its support for the action which is in exercise of its statutory powers.

The CBN also assured depositors of the Bridge Banks of the safety of their deposits, and the seamless business continuity and “ability of the Bridge Banks to meet obligations to depositors and lender-creditors as they arise, by granting all waivers forbearances and exemptions necessary for their operations.”

Also, the CBN announced the extension of the inter-bank guarantees of the bridge banks until December 31, 2011 to ensure their continued operations and customer confidence.

Stakeholders Reactions

Other stakeholders have described the takeover of the three banks by the regulatory authorities as “an ill wind as far as the banking sector is concerned.”

The Chief Executive Officer of Prime House Investment Limited, Mr Kenneth Ugbogu, said that the development would throw panic into the banking sector and create crisis of confidence in the other rescued banks.

Ugbogu, who said the details of the takeover were not yet known, stated that both the CBN and NDIC must ensure that the depositors in the affected banks were assured of the safety of their deposits while the recapitalisation issues in the affected banks were being pursued.

Reacting to the development, Mr Attan Ogbozor, a financial expert, said that if the Federal Government was taking charge, it was not a bad step.

He, however, expressed fear that the government might not succeed considering that it had no record of good management.

Ogbozor said that the effect of the decision on the Capital Market was not too good because banks contributed about 70 per cent of shares in the market.

He said that the CBN should ensure that whatever decision it was taking concerning banks should have a positive indication to avoid negative effects on the economy.

Williams