Central Bank under pressure over banks' audit results
Central Bank of Nigeria (CBN) is coming under intense pressure to speed up and release the results of the 14 banks whose special examination has been concluded and awaiting final approval of the Committee of Governors and the EXCO of Nigerian Deposit Insurance Corporation (NDIC).
This anxiety follows reports that the movement of the Chief Executive Officers and Executive Directors of 14 banks are being monitored by the State Security Services (SSS) of which four have had their international passports seized.
As the news broke at the weekend, several bank customers contacted editors of THISDAY, seeking to clarify the veracity of the reports and asking if theirmoney is safe in the banks if the SSS will be taking drastic measures of seizing passports and watchlisting bank executives.
There is the fear that with continuing rumours, there would be loss of confidence and a run on those banks after the Sallah holidays.
According to analysts, even if there is no run, given that the CBN has repeatedly said no bank will be allowed to fail, there will be a flight to safety from the 14 banks to the five banks, which have been cleared.
Newspapers had published different reports on the outcome of CBN's special examinations on 11 banks which were included in the second phase of the on-going bank reform audit exercise.
Banks included in the second batch of the audit exercise are Skye Bank, Bank PHB, Ecobank Nigeria Plc, Spring Bank Plc, Access Bank Plc, Wema Bank Plc, Unity Bank Plc and Equitorial Trust Bank.
The first audit exercise concluded before August 14 were conducted on Sterling Bank, GTBank, UBA, Diamond Bank, First Bank, Oceanic Bank, Afribank, Finbank, Intercontinental and Union Bank. This exercise led to the removal of Managing Directors and executive directors of the last five banks while the first five banks were given clean bill of health.
Three other banks, Standard Chartered, StanbicIBTC and Citibank are in the third batch for the audit exercise which is ongoing.
According to an unconfirmed report, as CBN has not taken a final position, four of the 11 banks whose audit was recently concluded – Spring Bank Plc, Bank PHB Plc, Equitorial Trust Bank and Wema Bank Plc – were said to have more questions to answer on the parameters set by the CBN.
The general parameters upon which the examinations of the banks' records were based include capital adequacy, liquidity, solvency and corporate governance.
The continued delay by the CBN in explaining the true situation of the remaining 14 banks which were not part of the first audit exercise had led to wide speculations in the media and financial sectors, both at home and abroad.
Many individual and institutional stakeholders have therefore been urging the CBN to quickly conclude the audit exercise and make a definite statement on the state of health of the 14 banks.
But CBN officials have insisted that they need time and must follow due process to do their work because after the report of its examiners, the process involved a thorough and rigorous quality control. It is after that, the officials said, the reports would go to the Committee of Governors and EXCO of NDIC.
CBN officials further insist that to do a thorough job, they cannot be stampeded and they will continue to assure the nation that no bank will be allowed to fail, while infractions would be ruthlessly dealt with.
Analysts had told THISDAY that a fallout of the lingering banks' audit exercise is the fact that while the 14 banks whose fate are unknown may be endangered, the situation confers undue and unintedned advantage on the five banks which have been cleared in the first exercise.
These banks which received clean bill of health in the first exercise – GTBank, First Bank, Diamond Bank, Sterling Bank and UBA – appear like the only ones already certified healthy, a source said.
“Don't forget that these banks are in competition. How can you clear five banks, declare that five others are already receiving good attention to correct their ailments, while 14 others have their fate hanging in limbo. In fact, as at today, the five banks whose MDs were changed and got new lifelines appear better than the 14 banks whose situation is uncertain,” a commentator lamented to THISDAY yesterday.
A director of one of the 14 banks who pleaded anonymity, said: “this is no level playing field. How can they tie our hands behind our back and expect us to make an impact in a race with those whose limbs are as free as the air. This runs counter to market economics. The CBN should stop giving advantage to a set of banks as if they have vested interests.”
Meanwhile, in an official reaction to the panic created in the sector by the rash of speculation on the second and third phases of the audit exercises, the CBN in a statement yesterday stated: “The CBN has noted with concern, stories in some segments of the press purporting to report decisions taken as a result of the on-going audit of Nigerian banks. The central bank confirms that examiners have concluded their work on 11 out of the 14 banks not included in the first audit exercise.
“They have also made significant progress on the remaining three banks and these are Citibank, Stanbic IBTC and Standard Chartered. The Central Bank confirms that the completed reports are due to be presented and deliberated upon by the committee of Governors and the EXCO of NDIC in the next two weeks and only after that process is completed will final decisions be taken”.
Shortly after his appointment as CBN Governor last June, Mallam Sanusi Lamido Sanusi, had ordered the special examination of all commercial banks in the country to determine their level of exposure to margin loans and the oil and gas sector in a bid to determine their solvency and capacity to continue as going concerns.
Speaking at an interactive session with the capital market community on the floor of the Nigerian Stock Exchange (NSE) last Wednesday, Sanusi said the audit of the remaining three (Standard Chartered, Stanbic IBTC, and Citibank) began last Wednesday.
"Each bank was examined by 10 examiners, five from CBN, and five from the Nigerian Deposit Insurance Corporation (NDIC). I have not finished looking at the reports," Lamido added.
He said the results of the audit would be made public early next month.