CAPITAL MARKET PROBE: COMMITTEE, CBN DISAGREE OVER NATIONALISATION OF BANKS
By Peter Egwuatu
The ongoing probe of the near collapse of the Nigerian capital market by the House of Representatives ad hoc committee, last week, took a dramatic turn as controversies ensued on issues that bothered on the three acquired banks by Asset Management Corporation of Nigeria (AMCON), and the composition of the corporation's board members.
The three banks that were taken over by AMCON are former Afribank Nigeria Plc, Bank PHB Plc and Springbank Plc.
The probe session that took place last week, Wednesday, came after the committee had failed to complete the probe within the seven days period given to it by the House of Representatives.
The committee had earlier postponed hearing for the second consecutive time after it had earlier invited former Central Bank f Nigeria (CBN) Governor, Professor Charles Soludo, embattled former Group Managing Director, (GMD) of defunct Intercontinental Bank Plc, Mr. Erastus Akingbola and former convicted GMD of defunct Oceanic Bank Plc, Mrs. Cecilia Ibru to appear before it unfailingly on April 20, 2012.
It will be recalled that the committee was given one week to complete the hearing and report its findings and recommendation to the House of Representatives.
The Chairman of the ad hoc committee, Hon. Ibrahim El-Sudi, on arriving at the hearing room, last week, Monday, said the opening prayer and called off the hearing, having earlier suspended scheduled hearing the penultimate week.
The stakeholders, operators and regulators who came for the hearing was disappointed when the postponement were announced.
El-Sudi while postponing the sitting till Wednesday May 02, 2012, said the sickness of his father had led to non communication between him and Channels Television.
Continuing he said, 'It will be unwise to hold the hearing, without live coverage by the accredited television house. Ladies and gentlemen, we have in the house, the Managing Director of Asset Management Corporation of Nigeria (AMCON), Director General of Securities and Exchange Commission (SEC), CEO of Nigerian Stock Exchange (NSE) and all other stakeholders in the capital market. We have Managing Directors of various banks and Deputy Governor of CBN.
Distinguished ladies and gentlemen, we have the movers and shakers in the capital market all here. But unfortunately, last week, I had to cut short my schedule for those of you that were here, to attend my sick father, thank God he is recovering. Basically, we are supposed to be covered live by Channels Television, but unfortunately because I was not around, there was breakdown in communication and they are unable to cover us live today.'
On the controversies over alleged nationalisation of banks, there was a disagreement on the status of three of the eight recapitalised banks, whose licences the CBN revoked in 2011 and were re-named by the Asset Management Company of Nigeria as Enterprise Bank (formerly Bank PHB), Keystone (Spring Bank) and Mainstreet (Afribank). The CBN Deputy Governor, Dr. Kingsley Moghalu, claimed that the three banks were not 'nationalised' as widely believed.
The committee, however, disagreed and insisted that by the nature of their acquisition by the CBN, AMCON and the Federal Ministry of Finance, they were now the property of the Federal Government.
According to the committee, 'The entire board members of AMCON are appointed by the CBN who is supposed to be regulating. You will just be regulating yourself.
Meanwhile, Dr. Kingsley Moghalu, Deputy Governor, Financial System Stability, who represented the Governor of CBN, Mallam Lamido Sanusi, argued that the term, 'nationalised,' still did not apply to the banks because their boards were intact, while there were private individuals among the directors. Nationalisation of these banks will occur if the public treasury was taken to bailout these institutions.
According to him, 'No tax payer money was involved in bailing out the banks. On the institutions you have talked about, the number of board members has worked extensively responsibly in supervising the management of AMCON. It is the result from these institutions that was taken over that matter.'
Also at the hearing, the apex bank admitted that it ought to have paid more attention to the banking sector which before the crash of the capital market in 2008 had contributed about 70 percent of the capital market capitalization.
He blamed other regulatory institutions - namely Securities and Exchange Commission (SEC) and Nigerian Stock Exchange (NSE) for the worrisome state of the capital market. He told the committee that the insider abuses had an impact on the capital market because the banking sector controlled over 60 per cent of the stocks as of 2008.
Giving the details of the crisis, Moghalu said , ' Spring Bank Plc, for instance, had 85 per cent non-performing loans; while FinBank Plc's non-performing loan was 47.5 per cent
Also Bank PHB Plc had 40.8 per cent non-performing loan; Oceanic Bank International Plc, 44.35 per cent; Afribank Plc, 47 per cent; Intercontinental Bank Plc, 48 per cent; and Equitorial Trust Bank Limited, 57 per cent.
'The banks were already on life-support before the CBN intervened in 2009. A strategy used by the banks to deceive investors in the capital market was to buy back their own shares, using depositors' money.' He cited the case of Afribank, which he said engaged three brokerage firms to buy back its shares, 'using 1,258 fictitious subscribers.'
'So, we had a situation whereby 66 per cent of the bank's offer was non-existent, but they used depositors' funds,' he added.
Similarly, Moghalu said Intercontinental Bank bought back 3.4 billion units of its shares.
He explained that the banks were eventually exposed when the market came under the weight of the global financial meltdown.
The deputy governor stated that most foreign investors had to withdraw their funds of over $15bn from the capital market in response to the economic crisis in their home countries.
In spite of the development, Moghalu said that the CBN managed the situation by ensuring that no depositor lost money and 'not a single bank failed.'
But, the committee disagreed with CBN that it ought to have intervened earlier than it did.
A member of the committee, Mr. Bimbo Daramola, observed that the CBN should not praise itself for intervening in the troubled banks, arguing that, 'the abuses took place directly under your watch. It was because you did not do your job. 'It is your fault; it is an institutional failure.'
On the N620 billion injected by the apex bank into the eight troubled banks, Moghalu disclosed that the money has been paid to the account of the apex bank. He said there was no need for appropriation by the National Assembly before taking such intervention.
In his presentation, Umaru Ibrahim, Managing Director of Nigerian Deposit Insurance Commission (NDIC) explained that the intervention of NDIC was acknowledged by Remi Babalola, a former Minister of State for Finance.
He noted that the publication of the state of health of the banks had been criticised by some banks, but that the Commission had stood its ground.
Ibrahim also called for more powers for the Commission to take deliberate steps in addressing the problems in the future. He revealed that NDIC had taken steps, in 2008, with former SEC Director General to raise concern about what was happening because as at that time, the regulatory exercise was so frustrating.
He added that CBN revoked the operating licences of the three intervening banks with N809 billion depositors' fund and protected 6,667 jobs and 3.7 million customers; and approved subsequent transfer of assets, among others, after due consultation with the presidency.