20100629
allafrica

Lagos — Indications emerged, weekend, that the Central Bank of Nigeria, CBN, has been secretly giving clearance to executive directors of the rescued banks, raising questions as to why they were sacked in the first instance.

Some top management staff of the apex bank who disclosed this to Vanguard, said letters have been going out from the Governor's Office since January to the affected directors, saying that CBN has not blacklisted them.

The officials added that CBN's letter also stated that the affected executive directors could seek gainful employment in the financial services sector and that security agencies had been advised to release the EDs' seized properties and travelling documents.

According to the CBN officials, almost all the executive directors of the rescued banks had been issued the letters except one or two that have refused to cooperate with CBN and the Economic and Financial Crimes Commission, EFCC.

The executive directors were sacked along with their managing directors by CBN Governor, Mr. Lamido Sanusi, on the allegations of running down the banks and putting them in grave situation.

Sanusi's letter

A copy of such letters signed by Sanusi reads in part: "Please, refer to my order dated 14 August 2009, directing your removal as an Executive Director of …. bank. Following the said order, several representations were made to the Central Bank of Nigeria (CBN), for a review of the circumstances leading to your removal from office.

"The management has duly considered these representations and wishes to state that your removal does not amount to being blacklisted by CBN. Accordingly, CBN hereby confirms that it has no objection to your seeking employment in the financial services sector subject to the express approval by CBN where required.

"However, it should be noted that the position stated above does not constitute a waiver of any action which CBN or any other agency of government may take against you should the on-going investigation in … bank reveal any serious misconduct or any infraction of extant laws or regulations.

"All relevant agencies are being advised to release your travel documents or any property in their possession," the letter stated.

Sanusi's action hasty

CBN officials said that usually when anybody is sacked from a bank or any financial institution, he/she is blacklisted by CBN and will not be employed by any bank in the country.

By this, the official said, CBN has nothing against these bank executive directors and should not have been sacked in the first instance. It shows, they said, that the Governor's action was hasty. If he now realised that he made a mistake by sacking the bank chiefs, he should do the proper thing by restoring them back to their jobs.

It will be recalled that CBN on August 14 sacked the managing director/chief executives and executive directors of five banks to wit, Afribank Plc, Finbank Plc, Intercontinental Bank Plc, Oceanic Bank Plc and Union Bank Plc. Two other banks— Bank PHB and Equatorial Bank— followed in October.

The affected chief executives were Mr. Sebastin Adigwe (Afribank); Mr. Okey Nwosu (Finbank); Dr. Erastus Akingbola (Intercontinental Bank); Dr. (Mrs.) Cecilia Ibru (Oceanic Bank) and Dr. Bath Ebong.

The apex bank also announced the appointment of new chief executives for the banks namely — Mr. John Aboh, MD/CEO, Oceanic International Bank Plc; Mr. Mahmud L. Alabi, MD/CEO; Intercontinental Bank Plc, Mrs. Suzanne Iroche, MD/CEO, Finbank Plc; Mrs. Funke Osibodu, MD/CEO, Union Bank Plc.

Why bank chiefs were sacked

Sanusi had said the banks' officials were removed due to high level of non-performing loans in the five banks which was attributable to poor corporate governance practices, lax credit administration processes and non-adherence to the banks'credit risk management practices.

He added that CBN was also injecting N400 billion tier two capital into the five banks to salvage the financial condition banks.

He said, "As at June 4, 2009, when I assumed office as Governor of CBN, the total amount outstanding at the Expanded Discount Window, EDW, was N256.571bn most of which was owed by the five banks.

"A review of the activity in EDW showed that four banks had been almost permanently locked in as borrowers and were clearly unable to repay their obligations. 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.

"Whereas the five banks were by no means the only ones to have benefited from EDW, the persistence and frequency of their demand pointed to a deeper problem and CBN identified them as probable source of financial instability, most likely suffering from deeper problems due to non-performing loans."

Sanusi declared that, the impact of the situation of these banks was being felt by the market in different negative ways. Because of this strain in their balance sheets, the banks pushed up the interest rate paid to private sector deposits and their competitors had to follow suit.

They also contributed to the destabilisation of the inter-bank market as many of their competitors were unwilling to take an unsecured risk on them. It was primarily because of these banks, or, at least some of them, that CBN took the step of guaranteeing the inter-bank market when it stopped granting new lines under EDW.

Without that guarantee, almost four banks would not have been able to borrow in the inter-bank and would probably have collapsed.

According to him: "As you are aware, we guaranteed the inter-bank market to give us the time to conduct a thorough diagnostic of the banks and ensure that appropriate remedial action is taken. At least, four of the banks in question, have since the guarantee came into force either remained heavy users of funds at the EDW or drawn heavily from other banks under cover of CBN guarantee to wind-down at this window. In all events, it is clear that they do not have the ability to meet their obligations to depositors and creditors."