NO fewer than seven more banks may come under the Central Bank of Nigeria (CBN) hammer, as the apex bank is set to announce the completion of the audit exercise conducted on another set of 11 banks. advertisement According to a dependable source at the apex bank, the CBN Governor, Mr. Sanusi Lamido Sanusi, will this week announce the full results of the examination exercise which ended last week, adding that more bank chief executives would be affected. He explained that the CBN auditors made startling discoveries on the level of rot in the banks, stating that the bank chiefs were involved in insider abuses, coupled with breach of corporate governance in their respective banks. The source further said that the level of non-performing loans discovered in the first round of the audit report was small compared with that of the 11 banks that had just been audited. The source also confirmed to the Nigerian Tribune that the announcement was being delayed because of last week’s London roadshow embarked upon by top officials of the CBN, adding that Sanusi had promised to submit the report to President Yar’Adua this week before taking a final decision. Further investigations revealed that the apex bank was highly agitated as further removal of CEOs might cause a run on the banking system. Nigerian Tribune gathered that that some of the banks’ top executives who were in the know of the latest developments were making desperate moves to ensure the report did not see the light of day. It will be recalled that the apex bank, on August 14, sacked the managing directors and executive directors of five banks over alleged breach of corporate governance practices in their respective banks. The CBN hinged the removal of the bank chiefs on excessive high level of non-performing loans due to alleged poor corporate governance practices, lax credit administration and non-adherence to the banks’ credit risk management rules. The affected banks are Intercontinental Bank, Union Bank, Oceanic Bank, Afribank and FinBank. According to Sanusi, these banks had huge exposures to the capital market and the oil and gas sector due to general weakness in risk management and corporate governance. He stressed that the affected banks were perennial net takers of funds from the Expanded Discount Window (EDW) and lately, the inter-bank market. He added that from October last year, these banks had shown liquidity strains and had to be given financial support by the CBN through the EDW. According to the apex bank boss, as of June, the total amount outstanding at the EDW was N256.57 billion much of which was owed by the affected banks. He noted that it was because of this development that the CBN started guaranteeing the inter-bank market when it stopped granting new lines under the EDW, adding that without the guarantee, at least four of the banks would have collapsed. Sanusi stated that a special examination conducted by a joint team of CBN and NDIC officials had shown that the affected banks were on the path of distress. He noted that the joint audit was continuing and that those of 10 banks, including the affected banks, Diamond Bank, FirstBank, UBA, GTBank and Sterling Bank had been concluded, adding that the audit of the 14 remaining banks would also be carried out and concluded mid-September this year. He said that there would be no systemic run on the banking system as a result of these moves, as well-thought plans had been put in place to ensure that no bank failed. “Total loan portfolio of the affected banks was N2,801.92 billion, while margin loans amounted to N456.28 billion and exposure to oil and gas was N487.02 billion and aggregate non-performing loans stood at N1,143 billion, representing 40.81 per cent,” the apex bank boss stated. He continued: “The huge provisioning requirements led to significant capital impairment, adding that one of the banks is technically insolvent with a capital adequacy ratio of 1.01 per cent. “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.” In rescuing the banks, Sanusi said three of the banks were systematically important to the system and that a failure to act to secure the financial health of these banks would place the system at a great risk. “To this end, the CBN announces the injection of N400 billion into the affected banks to keep them in business. This amount would only be used in helping to stabilise them as a temporary measure, as the government does not have the intention to hold the shares for long,” he stated. He further stated that the government would divest its holdings in the banks as soon as new investors recapitalise them, adding that he had the nod of the Presidency on all measures he was taking, a fact attested to by the presence of the Head of Service. Meanwhile, the CBN governor, Mr. Lamido Sanusi has been summoned to appear before the House of Representatives Committee on Banking and Currency to explain where he derived the power to inject over N400billion into five banks without the prior authorisation of the National Assembly. The apex bank had recently sacked the Managing Directors/Chief Executives and Executive Directors of five banks, Afribank Plc, FinBank Plc, Intercontinental Bank Plc, Oceanic Bank Plc and Union Bank Plc and announced the injection of aboutN400billion into them to beef up their financial positions. But the action as well as the ongoing arrest and detention of the bank top managers have since been trailed by controversy. A high-ranking source close to the committee told the Nigerian Tribune on Monday in Abuja that Sanusi was invited to shed light on the fund injection but also to provide the lawmakers an opportunity to convince themselves that there was no ulterior motive in the actions of the apex bank. The Nigerian Tribune learnt that though the National Assembly was on break, the committee had recalled its members for the appearance of Mr. Sanusi scheduled for tomorrow at the National Assembly complex. The committee was said to be worried about the speed with which the CBN had approached the issue as “it appeared that it has not given itself the opportunity to take a holistic view of the banking sector in the country.” It was also learnt that the committee would be demanding clarifications on allegations that have been made by those opposed to the current CBN action, including “handing over the banking sector to a section of the country” as well as the role, if any, played by the previous dispensation in bringing about any crisis in the banking sector. In justifying the injection of funds into the banks, the CBN boss had said that as of June 4, 2009 when he assumed office as Governor of the CBN, the total amount outstanding at the Expanded Discount Window (EDW) was N256.571 billion, most of which was owed by the five banks. According to him, “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 obligations” and “a fifth bank had been a very frequent borrower when its profile ordinarily should have placed it among the net placers of funds in the market.” He further stated that “whereas the five banks were by no means the only ones to have benefited from the EDW, the persistence and frequency of their demand pointed to a deeper problem and the CBN identified them as probable source of financial instability, most likely suffering from deeper problems due to non-performing loans.” In another development, the substantive Chief Executive Officer appointed by the Central Bank of Nigeria (CBN) for Intercontinental Bank Plc, Mr. Mahmoud Lai Alabi, assumed duty on Monday at the bank’s corporate headquarters in Victoria Island, Lagos. Alabi, in his first meeting with the top management of the bank, announced that the worst was over, stating that Intercontinental Bank has remained a very solid brand. The bank, according to him, would be building on the existing successes and trengths to achieve better performance. On the strategic focus of the bank in the short term, Mr. Alabi said that loan recovery was the topmost priority which would be pursued very aggressively with the support of both CBN and the law enforcement agents. He said the bank would continue to grow its deposit base while restoring profitability quickly. He also stated that top quality customer services delivery would be sustained. Alabi had earlier been briefed by Mr. Joseph O. Ajewole, who was the Acting Group Managing Director since August 14, 2009 when CBN intervened in the bank. He expressed satisfaction with the tempo of business activities since CBN’s intervention. He commended the management for the commitment, competence and team-work which they have demonstrated since the CBN’s action two weeks ago. Source: odili.net