by kevindooley

1970s Advertising – Poster – Peter Max Chelsea National Bank (USA)

Image by Pink Ponk
1971 Poster Advertisement
"Chelsea National Bank"
Artist / Advertising Agency: Peter Max
USA

Emerging facts are casting doubts on the Central Bank of Nigeria’s classification of the last three Banks it audited, namely Bank PHB Plc, Spring Bank, and ETB as being in a “grave” situation. The doubts have arisen following revelations that the N200 billion the CBN said it has injected into the said Banks were not made available to the Banks. Rather the CBN asked the Banks to go and determine how much of fresh capital they will need and make a request for the said capital. For me, this may be a clear indication that the Banks situation may not be as grave as the CBN alleged or else the CBN would have given the Banks the money to survive.

If their liquidity challenges were as grave as the CBN said, why were they not given money as it was done with the initial five Banks? If they could be given time to request capital from the CBN, why were they not given time to request capital from their shareholders? Is the CBN ruling out the ability of their shareholders to recapitalize the Banks or the CBN just did not want the shareholders to recapitalize the Banks? Is it possible that the CBN audit that said these Banks were undercapitalized could not determine how much capital these Banks required? So how did the audit reach the conclusion that these Banks were undercapitalized?

Besides, there is also a big question on the CBN allegation that these Banks lacked sufficient liquidity.  My question: is it not the same CBN that said, in the first audit, the five Banks it took over their management accounted for 90 percent of all the borrowings in the inter-bank market or consequently the liquidity challenges in the industry?  The implication is that the remaining Banks, including Bank PHB, Spring Bank and ETB accounted for less that 10 percent of inter-bank borrowings or the liquidity challenges in the industry; when did these Banks suddenly start having liquidity challenges? Was it after the CBN released the audit result of the first 10 Banks or the Banks were always having liquidity challenges which will mean that the CBN lied when it said that the five Banks it initially took over accounted for 90 percent of all inter-bank borrowings?

Also questionable is the CBN statement that Unity Bank has “no corporate governance issues.” This vote of confidence in Unity Bank’s corporate governance status is laughable. “How do you say a bank that is quoted on a recognized stock exchange but has not deemed it fit to make public any financial report in the last three years has no corporate governance issues? When last did Unity Bank hold an Annual General Meeting (AGM)? Where is their financial report card, who is the board accountable to? So how do you rate such a bank as having strong corporate governance? Is corporate governance just about having a board that seems not to have any shareholding in the bank they sit on, but are proxy for other big shareholders? Is the existence of a board that does not give account of its stewardship to shareholders a sign of good corporate governance? Is the existence of a board that has not been able show an audited account in the last three years a sign of good corporate governance? Perhaps, the CBN should give us its own definition of Corporate Governance.

Also how do you say Unity Bank is okay because it has enough liquidity but inadequate capital? Is the CBN saying it is okay for a bank to run its business with depositors’ funds without having its own capital? So when it runs into losses, what does it write it off against? Depositors’ funds?  Has Unity Bank been making profits or losses in the last three years? If it has been making losses, what has the losses been written off against?

Good enough the CBN published the list of nonperforming loans of the affected banks. Interestingly Unity Bank has a non performing loan portfolio of N36 billion. Three years ago when we last had figures on Unity Bank, its total capital was not more than N30 billion. As it is expected Unity Bank will make a full provision for this facility. This will totally wipe out is capital base and eat into depositors funds. Yet, this is the same bank the CBN says has no liquidity or corporate governance issues. 

Unity Bank’s management was spared. But Bank PHB with a capital base in excess of N250 billion and nonperforming loans of N171 billion had its management sacked. If you were to write off Bank PHB’s loan against its capital, it still has excess capital of N80 billion, more than twice the regulatory minimum of N25 billion. Taken, by the time you subsume, Spring Bank’s net nonperforming facilities, it leaves Bank PHB with a capital base of about N15 billion, below the regulatory minimum, but still better off than Unity Bank’s precarious position. So why remove Bank PHB management and spare Unity Bank? I will refrain from speaking on the positions of Wema and ETB for obvious reasons. Wema is understandably recovering from a rough patch and ETB is more or less a private bank.

Also why spare the management of Wema Bank and sack the management of Spring Bank. Both managements were relatively new and both were sent on a rescue mission. Spring Bank management had worked hard to largely restore confidence in the bank by both staff and customers in the relatively short period they took over. So why were they sacked? Was it for restoring confidence in a bank that was almost dead? If Wema Bank’s management were spared for being new, why was Spring Bank management which had just been in the bank for seven months not also spared?

Sanusi’s so called banking reforms has been unnecessarily alarmist and damaged confidence in the Nigerian banking system that will take a very long time to restore. Besides, the reforms has failed to identify clear outcomes and has handed largely strong Banks over to rooky managers, most of whom have never managed a multibillion Naira business in their lives before. It has also destroyed the management continuity structure in place in most of these Banks and most importantly has left the CBN controlling almost 50 percent of banking business in Nigeria, a highly unfavorable development in the Nigerian economy. 

Introduction to bank notes (which you are more familiar with than you realize).
Video Rating: 4 / 5

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