CBN boss sacks Ibru, Akingbola, 3 others

He immediately replaced them with  Mr John Aboh as Chief Executive Officer for Oceanic Bank, Mahmud Alabi as that of Intercontinental Bank, Nebolisa Arah as Afribank’s, Suzanne Iroche, Finbank’s and Mrs Funke Osibodu as the new Managing Director for Union Bank Plc.  Briefing newsmen in Lagos yesterday on developments in the banking system in Nigeria, […]

He immediately replaced them with  Mr John Aboh as Chief Executive Officer for Oceanic Bank, Mahmud Alabi as that of Intercontinental Bank, Nebolisa Arah as Afribank’s, Suzanne Iroche, Finbank’s and Mrs Funke Osibodu as the new Managing Director for Union Bank Plc.  Briefing newsmen in Lagos yesterday on developments in the banking system in Nigeria, Sanusi said the CBN is injecting about N400 billion into the five affected banks with immediate effect in form of tier 2 capital to be repaid from proceeds of capitalization in the near future. He said the injection is sufficient to resolve and stabilize all the institutions and enable them continue normal business.

“As at June 4, 2009 when I assumed office as governor of the CBN, the total amount outstanding at the Expended Discount Window (EDW) was N256.571 billion, most of which was owed by the five affected banks. A review of the activity in the EDW showed that four banks had been almost permanently locked in as borrowers and were clearly unable to repay their obligation.”

With the findings and many more, the CBN governor said he instructed the Director of Banking Supervision to carry out a special examination of the five banks. He said the examination was conducted by a joint team of CBN and Nigerian Deposit Insurance Corporation (NDIC) officials.

The findings, he said, include excessively high level of non-performing loans in the five banks attributable to poor corporate governance practices, lax credit administration processes and the absence or non-adherence to the bank’s credit risk management practices, bringing the percentage of non-performing loans to total loans ranging from 19 per cent to 48 per cent.

The banks, he said, would need to make additional provision of N539.09 billion.

Secondly, he said the total loan portfolio of the affected banks was N2.801.92 billion. Margin loans amounted to N456.28 billion and exposure to oil and gas was N487.02 billion while aggregate non-performing loans stood at N1.143 trillion, about 40.81 per cent.

Sanusi continued: “It is evident that the five banks accounted for a disproportionate component of the total exposure to capital market and oil and gas, thus reflecting heavy concentration to high risk areas relative to other banks in the industry.” He also said the huge provisioning requirements have led to significant capital impairment.

“Consequently, all the five banks are undercapitalized for their current levels of operations and are required to increase their provisions for loan losses, which impacted negatively on their capital. Indeed, one is technically insolvent with a capital adequacy ratio of 1.01 per cent. Thus a minimum capital injection of N204.94 billion will be required in the five banks to meet the minimum capital adequacy ratio of 10 per cent,” he said.

He said the five banks were either perennial net-takers of funds in the inter-bank market or enjoyed liquidity support from the CBN for long periods of time, a clear evidence of illiquidity.

“In other words, these banks were unable to meet their maturing obligations as they fall due without resorting to the CBN or the inter-bank market. As a matter of fact, the outstanding balance of the EDW of the five banks amounted to N127.85 billion by the end of July 2009, representing 89.81 per cent of the total industry exposure to the CBN on its discount window while their net guaranteed inter-bank takings stood at N250.30 billion as at August 2, 2009.

“Consequently, having reviewed all the reports of the examiners and the comments of the directors and deputy governors, I am satisfied that these five institutions are in a grave situation and that their management have acted in a manner detrimental to the interest of their depositors and creditors. Therefore, in exercise of my powers as contained in sections 33 and 35 of the Banks and Other Financial Institutions Act 1991, as amended, and after securing the consent of the board of directors of CBN, I hereby remove the managing directors and executive directors of the following banks from office with effect from Friday August 14, 2009. The banks are Afribank Plc, Intercontinental Bank Plc, Union Bank of Nigeria, Oceanic Bank and Finbank Plc”. Sanusi then named the new managing directors.

He said the new chief executive officers would continue to manage the banks as ongoing concern until the banks are re-capitalized and new owners appoint new management adding that he would not give a timeframe when the tenure of the interim management would expire. “Their jobs are to ensure the affected banks continue to run and I will like to continue assuring Nigerians that the action taken by the CBN has made the banks to be more capitalized in the best interest of the economy, investors and the shareholders.”

Sanusi, however, advised all debtors of Nigerian banks to pay up as the CBN and all government agencies are united in support of the recovery efforts. “Debtors who do not pay shall have their names published in national newspapers in due course and we will solicit the support of law enforcement agencies in recovery,” he said.

He also reassured the customers of the affected banks and all other banks that there is no cause for alarm. “They should continue to transact their normal business in the banks where their accounts are domiciled as the exercise is meant to further strengthen the banking industry and recapitalise the affected banks.”

He said it was not only the five banks that the apex bank conducted investigation on. “The scope of the special examination was widened to cover all 24 banks. So far, we have concluded the audit of 10 banks including these five, the others being Diamond Bank, First Bank, United Bank for Africa, Guaranty Trust Bank and Sterling Bank. We have also commenced the next batch of 11 banks and hope to conclude them by end of August. All in all, we expect to conclude the audit by mid-September,” he said.