Another banking crisis coming up – 2
On May 7, 2012 · In Sobowale On Business 12:22 amEmail0

By Dele Sobowale
Those who go in for banking must accept the consequences, because if there were no consequences, everybody would go in for banking”. Charles Dickens, 1812-1870

If anyone had asked Sanusi Lamido Sanusi three years ago his choice between becoming the Emir of Kano and the Governor of Central Bank; he would have chosen the former. But like Prince Charles of Britain, whose mother, Queen Elizabeth II, has reigned since 1952, and is still going strong, Lamido too must wait indefinitely to pursue his ultimate ambition – which does not include being remembered as a great banker. Banking was just something to do while waiting.

That was why, unlike his predecessor, he did not lobby much for the job; instead the job came looking for him. That might have explained his distractions and his aloofness bordering on arrogance.

Soludo plotted his own ascendancy to the Central Bank of Nigeria. First, as Chief Economic Adviser to the President, he was the lead author of the National Economic Empowerment and Development Strategies, NEEDS I; which was full of tantalising projections about where Nigeria would be by 2010.

But, tucked in that document was the key point – Nigeria would not get there with all the weak banks then operating. And the only person to do the job must be an outsider. For too long insiders, meaning former Managing Directors of commercial banks have been promoted to the post.

That idea must have been drummed into Obasanjo’s ears – who eventually caved in and when Chief Joseph Sanusi, ex-First Bank Managing Director left, Soludo became the logical choice. He wanted to leave a legacy; unfortunately, what he left was not quite what he had in mind.

When Sanusi took over,he proceeded to dismantle the Soludo legacy. And although, there is no indication he intends to erect a monument, he will all the same. The crisis might occur before he goes to Kano for the coronation. It is brewing with a fury known only to beer Brewmasters.

Most banking crises start from one incident, a breach of the rules and regulations, in one bank which benefits a few people; gets copied by other banks or is repeated by the same bank until it becomes routine. The current case involving the former Managing Director of the defunct Intercontinental Bank, Plc and the former governor of Kwara State is one of the two examples which will be examined today to round up this warning.

As stated last week, if the allegations are proved beyond reasonable doubt, the the Governor of the Central Bank must bear a significant portion of the blame for appointing someone whose track record had been revealed as questionable in the past.

At the moment the focus is on one allegation pertaining to granting waivers to Senator Saraki’s firms under questionable circumstances and releasing the securities for the loan prematurely; thereby leaving the bank holding to thin air for its exposure – N9 to 11 billion worth of it. One can only pray it is not true; for the sake of Mr Alabi; more for the sake of Senator Saraki and for the sake of the Nigerian banking sector.

That incident raises several questions to which this writer already has some answers. The first is, was that the only loan handled in this manner? If not, how many more loans are involved? For those who might not grasp the implications of those questions, let me quickly explain.

Intercontinental Bank had since merged with Access Bank and unfortunately the existing bank might have, inadvertently, inherited more toxic loans from Intercontinental. Two closely linked aphorisms serve as our guide here. The first says, “Appetite grows with eating”.

The second was provided by the only elected President Nigeria never had, late Chief M.K.O. Abiola. He said, “No man stands all day in the rain for nothing”. These questions are pertinent, not just in the Intercontinental case but with all banks existing at the moment.

The next question is for the Central Bank to answer. Are there no guidelines which must be followed before a bank can grant this magnitude of a waiver? If, yes, were they followed and did CBN examiners to the bank check these? If not, how could the examiners have missed this huge write off?

The more you look, the more it can be seen that the CBN was somehow derelict in its duties and its responsibilities to the shareholders of the bank who had no say in the appointment of the Managing Directors. And, if it was careless in one case how can the stakeholders in the banking sector have confidence that this is an isolated case. Information reaching me suggests it is not.

When we turn to the pension scandal, one is appalled and the heart melts. Here the rules and regulations guiding deposits by individuals, as well as opening of accounts are so clear that no banker can claim ignorance of them. There is the “Know Your Customer” principle and the mandatory requirement to report deposits of one million or more into an individual account.

Yet virtually all the banks conspired with old and new customers to launder stolen pension funds belonging to millions of individuals. Even with the rather lenient penalties attached to these offences, the banks face billions of naira in penalties directly; and billions more in claims from affected groups indirectly.

In these cases we are not talking about a few individuals but a systemic and pervasive violation of the laws. The bankers who have appeared at public hearings have sounded like people interested in passing the buck and running for the border than people certain of their innocence. Heads, again will roll.

Sanusi, this time, should not be allowed to single-handedly appoint new Chief Executive Officers to replace those who might be implicated.

The obvious question; to which there is also an obvious answer is: why did so many bankers risk their careers and the fortunes of their banks by engaging in widespread money laundering? The answer is “they were desperate”. Both individually and as banks people had become desperate.

Retrenchment occurs every day sending hundreds of bankers into the job market and an uncertain future. Most, on account of loans taken, would depart with very little. Under the circumstances, it was easy to bend the rules, collaborate with pension fund thieves and hope to put away something for the future.

Diminished job security is one reason for the collective violation of banking rules and regulations. The negative variances between projected revenue and profits also act as catalysts to law breaking. When deposit targets are not being met, bank managers become vulnerable to dubious deals.

Most succumb hoping that the violations can be concealed through a combination of other deals with CBN staff, creative accounting and complaisant auditors. Some of the tell-tale signs are there when depositors spend long hours at branches trying to withdraw money.

Also, when your bank “fails” to clear local cheques deposited within three working days, or out of state cheques for almost a week, into your account – especially on week-ends — you should suspect deliberate delay by the bank. Or when salaries paid into your account “have not been processed”. Invariably, it is not just a few customers; it is every customer who is subjected to “go slow” treatment.

Like all the previous bank crisis, this too started slowly, by a few bank managers in a few branches and regional offices. Suddenly, the exception became routine once again in Nigerian banks. But, as appetite grew with eating, it became an all-comers affair. Now virtually all the banks were consumed by it.

The CBN had been issuing threats to deal with all the banks involved. That is akin to wanting to close the gate after the cows have fled. To start with the bankers opening dubious accounts did it deliberately and were paid for their “services”.

Furthermore, a lot of the funds deposited and which, if reported as required by law, would have been recovered intact have been spent. A great deal of the stolen funds and the bribes to the bankers have vanished; but the banks are liable.

Once again, the question is: where were CBN bank examiners while all these were going on? Increasingly, what these cases reveal is a governor and group of Executive Directors who have been derelict in their duties; who have not been supervising the banks and who have allowed another crisis to develop so soon after the last one. Like drunken sailors on shore leave our bankers have stumbled from one crisis to another – thanks to poor supervision this time.

http://www.vanguardngr.com/2012/05/another-banking-crisis-coming-up-2/