The events that led to the Central Bank of Nigeria wielding the big stick and left five Nigerian banks choking on financial fish bone have been traced to years of consistent manipulation in the banking sector. Sunday Sun can authoritatively reveal that dirty business deals, short-sighted investments and lack of respect for basic banking procedures were some of the reasons the apex bank used to hang five Chief Executive Officers and their Boards, out to dry last Friday. It all started before the word ‘de-marketing ‘ crept into our lexicon. But Nigerians certainly started noticing things were not so rosy for all the banks when strange text messages started doing the rounds in the wee hours of the day. Investigations revealed that the axed five banks were involved in Annual Reports padding, illegal fees, unsecured loans and exceeding laid down rules on servicing single obligor were some of the financial iniquities that caught up with bank CEOs and the boards. Though there was a limit to the powers of a Bank MD, the sacked CEOs, according to findings, still found ways to cut corners with active participation of ‘loyal’ board members to circumvent the health of their banks. One of such instances was a case where one of the banks gave an unsecured loan to the tune of N17bn to a notable business mogul, a practice that was against all known practices in banking in respect to a single obligor limit. ‘Granting a loan of that magnitude to a single corporate entity is not a decision the CEO could have taken alone. The gentleman’s board was also in the know. What this bank was also doing was charging illegal fees of all kinds under different names to cover their bad practices. We also discovered that 92% of this bank’s profit was made in December.’ Sunday Sun also learnt that the indicted banks also have hefty files of petitions against them at the EFCC. These petitions were about manipulation of bank reports and falsifying figures to hoodwink investors, customers and the general public. Inundated virtually on a daily basis by torrents of complaints about the evils going on in the banking halls, the anti-graft agency swung into action and asked the various banks to furnish it with details of their Initial Public Offers (IPOs) from 2005 till date. What EFCC discovered was a can of worms, steady greed and tireless manipulation. “The agency found that where a bank, for instance, announced that it was offering the public 100million shares, all it would make available was 70million shares while the balance of 30million are kept for the bank’s bigwigs. The 30million shares were never paid for. Because the total IPO sum was not released, the shares were oversubscribed and investors got the impression they were making good investments. Eventually they release the 30% withheld shares and sold at artificial prices, which of course other investors could not participate in because their share certificates were still being ‘processed’. Unfortunately, proceeds of these ‘evening market’ deals all ended in private pockets which is one of the factors that crashed the stock market.” Our source revealed. The conclusions of the EFCC after its investigation were damning. The affected Bank CEOs quickly held a meeting, ran to Aso Rock and convinced the President that if the EFCC moved against them, it would spell disaster for the nation’s economy. Considering that the economy, or what was left of it was already anemic, the President was said to have agreed that any kind of surgery on the banking sector would be fatal. The banks and their handlers escaped with a slap on the wrist and told to go and sin no more. By the time the CBN Governor, Sanusi Lamido, sacked the five CEOs and their Executive Directors on Friday, it was evident that their sins had finally found them out. However, the fate that befell the five banks on Friday was just a starter course as the ongoing audit of the banks is set to claim another casualty in September. The new generation bank whose helmsman had had a couple of brushes with the EFCC in not too distant past has also been found to be too weak to be allowed to continue operations in the sector. Its CEO, Sunday Sun learnt, would be told to find another job when the CBN masquerade comes to town next month. The bank and its management having seen the bad writing on the wall had been driving its staff, especially those in the marketing depart The CBN hammer fell on five money deposit banks yesterday as the apex bank sacked their boards and management and in their place appointed new managing directors to oversee their affairs. The affected banks are Union Bank of Nigeria Plc, Afribank Plc, Intercontinental Bank Plc, Oceanic International Bank Plc and Finbank Plc. CBN Governor, Mallam Sanusi Lamido Sanusi, who announced the take-over of the banks hinged the action on “excessively high level of non-performing loans in the five banks,” which he attributed to “poor corporate governance practices, lax credit administration processes and the absence or non-adherence to the bank’s risk management practices.” Sanusi appointed Mr. Johnson Aboh as the Managing Director/Chief Executive Officer of Oceanic Bank, Mr Mahmud L. Alabi, Managing Director, CEO, Intercontinental Bank; Mr. Nebolisa Arah, Managing Director/CEO, Afribank Plc; Mrs Suzanne Iroche, Managing Director/CEO, Finbank Plc and Mrs. Funke Osibodu, Managing Director/CEO, Union Bank Plc. The CBN governor said that the banks’ percentage of non-performing loans to total loans ranged from 19 per cent to 48 per cent, adding that the five banks would need to make additional provision of N539.09 billion to take care of the bad loans. Sanusi, who also announced a capital injection of about N400 billion by the CBN into the five banks, said the total loans portfolio of the five banks was N2,801.92 billion, with margin loans amounting to N456.28 billion, while exposure to oil and gas was N487.02 billion and aggregate non-performing loans standing at N1,143 billion, representing 40.81 per cent. The CBN governor said the five banks accounted for a disproportionate component of the total exposure to the capital market and oil and gas, thus reflecting heavy concentration to high- risk areas relative to other banks in the industry. On the other hand, he said the “huge provisioning requirements have led to significant capital impairment.” Consequently, he said “ all the banks are under-capitalized for their current levels of operations and are required to increase their provisions for loan losses, which impacted negatively on their capital.” The governor noted that one of the five banks was technically insolvent with a Capital Adequacy Ratio of (1.0 per cent), thus, a minimum capital injection of N204 billion would be required in the five banks to meet the minimum capital adequacy ratio of 10 per cent. 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 period of time, noting that this is a clear evidence of illiquidity. In other words, he said 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 on the Expanded Discount Window (EDW) of the five banks amounted to N127.85 billion by end July 2009, representing 89.81 per cent of the industry exposure to the CBN on its discount window, while their net guaranteed inter-bank takings stood at N253.30 billion as at August 02,2009. Their Liquidity Ratio ranged from 17.65 per cent to 24 per cent as at May 31, 2009. (Regulatory minimum is 25 per cent),” Sanusi lamented. Source: Daily Sun