More information have emerged to explain Central Bank of Nigeria (CBN)’s inability to allow three commercial banks, whose operating licenses were withdrawn last August, to conclude on-going recapitalisation talks with interested investors before applying its sledge-hammer.

Speaking at an interactive session with the media in Lagos, on Monday, Managing Director and Chief Executive of Asset Management Corporation (AMCON), Mr Mustafa Chike-Obi, explained that the facts on ground in respect of the three rescued institutions as at the time of CBN’s intervention made it too glaring to all stakeholders that the banks were nowhere near meeting the procedures precedent to consummating a recapitalisation deal by end of September 2011.

Chike-Obi, who said he was speaking as an insider in the rescue mission for the affected institutions since November last year, when AMCON became operational, stated that the banks made little or no progress at all on the recapitalisation process.
He pointed out that besides their heavy borrowings from the interbank market to run their overheads, there was so much rancour and bickering within the board and management of the institutions, stressing that such high level of instability made it difficult for the institutions to concretize their recapitalization strategies.

The AMCON boss said the banks were borrowing between N2 and N3 billion monthly to run their operations, and this could sum to over N30 billion annually, an amount that the regulators cannot sustain for too long under the current reform dispensation, as it would only leave CBN with the option of liquidating them along the line.

According to him, the real cut-off date for the banks was July 15, 2011 and any bank that had nothing concrete to show regarding its recapitalization programme was actually not committed to the September 30 deadline.
He said: “September 30 is not like a factory where you go in and manufacture the recapitalization programme and present to the regulators. Banking recapitalization involves several rigorous and tedious processes with definite timelines.

“For instance, for you to progress with the recapitalization programme, a bank must sign a Memorandum of Understanding, followed by various approvals from the Securities and Exchange Commission, and Transaction Implementation Agreement as well as Court Ordered Extra-Ordinary Meeting. And so we realized early in August that these three banks would not be able to make it even if we waited for September 30 or even extend the deadline for them,” he explained.

Chike-Obi said the CBN intervention with the bridge banks was a preemptive measure to forestall a major run that would have finally grounded the banks and impair depositors’ funds in them.
He expressed satisfaction with the progress made by five other banks, stressing the impending fresh injection from core investors would further stabilize them and restore customers’ confidence.

It would be recalled that the Central Bank of Nigeria had on August 5, withdrawn the operating licenses of three commercial banks, Afribank, Spring Bank and Bank PHB Plc, replacing them with Maintsreet Bank, Enterprise Bank and Keystone Bank limited respectively.

This was coming after it gave its approval to Union Bank, Finbank, Intercontinental Bank Oceanic Bank and Equatorial Trust Bank limited to proceed with their various arrangements having been satisfied with the progress so far recorded by them.



http://www.sunnewsonline.com/webpages/news/national/2011/sept/21/national-21-09-2011-0015.html