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Bank MD loots N97bn
• Invests N12bn depositors’ funds in personal firm
By MADUKA NWEKE
Wednesday, September 23,
2009
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•Photo:
Sun News Publishing |
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Following the second round of banks’ audit exercise conducted
by the Central Bank of Nigeria (CBN), officials of the apex bank
found that a managing director (name withheld), whose shareholders
have strong political influence in the current administration, allocated
to himself share capital of N85 billion that is yet to be paid up.
Daily Sun source also revealed that the same MD allocated shares
to a local airline to the tune of N18 billion as corporate investments.
The airline, the source said, denied knowledge of the deal. The
bank MD is also alleged to have invested N12 billion depositors’
funds in a supposed subsidiary of the bank.
The source said the company was found to be the MD’s private
firm. The conclusion of the latest audit has already sparked fear
in the financial sector. The CBN examiners were said to have concentrated
on liquidity; loan verification such as loans to stockbrokers, petroleum
products importers, performing and non performing loans; corporate
governance issues; processes and resources spent on information
technology.
The funding is contrary to CBN Governor, Mallam Sanusi Lamido’s
conclusion that the remaining banks were not as bad as the others.
According to him, he did not expect many surprises as the remaining
14 banks were not significantly different but latest development
had proven him wrong.
It was gathered that the apex bank was yet to conduct what they
described as forensic accounting investigation on any of the 24
banks in the country.
The managing director of at least one bank has reportedly visited
the State Security Service (SSS), to deposit his passport. This
is to prevent him from travelling abroad.
Bankers are of the view that two or three banks may be affected
by the decision of Mallam Lamido not to allow family banks in the
country anymore.
The CBN governor’s policy to end family owned banks, the bankers
believed, may be partly responsible for the fate of Oceanic Bank
and Intercontinental Bank, seen as being dominated by the personality
of their managing directors.
Sanusi at a forum on Wednesday while briefing capital market operators
warned that CBN would not allow banks to be run as a sole proprietorship
but as institutions that would imbibe the tenets of good corporate
governance, promising to treat shareholders of the affected banks
fairly and also ensure that, henceforth, banks in the country were
run as institutions rather than as sole proprietorships.
Sanusi also allayed fears of nationalizing the five troubled banks
whose managing directors and executive directors were sacked following
their gross misuse of shareholders’ funds and inability to
meet up with other banking statutory obligations.
The governor said the results of the remaining banks would be made
known in October 2009, but opined that their results would be better
than those of the 10 banks examined earlier from which five were
summarily sacked.
The CBN governor had on August 14 sacked the managing director of
and executive directors of Afribank Plc, Finbank Plc, Intercontinental
Bank Plc, Oceanic Bank Plc and Union Bank Plc. The examination was
conducted by a joint team of CBN and NDIC officials.
According to the CBN audit the major findings on the five banks
were excessive high-level non-performing loans, which led to poor
corporate governance practices, lax credit administration processes
and the absence or non-adherence to the bank’s credit risk
management practices, leaving the percentage of non-performing loans
from 19 per cent to 48 per cent. The five banks will, therefore,
need to make additional provision of N539.09 billion.
The total loan portfolio of these five banks was N2, 801.92 billion.
Margin loans amounted to N456.28 billion and exposure to oil and
gas was N487.02 billion. Aggregate of non-performing loans were
N1,143 billion representing 40.81 per cent. The five banks accounted
for a disproportionate component of the total exposure to capital
market and oil and gas, thus reflecting heavy concentration to high
risk areas relative to other banks in the industry.
The five banks were either perennial net-takers of funds in the
inter-bank market or enjoyed liquidity support from the CBN for
long periods of time, a clear evidence of liquidity problem. In
other words, these banks were unable to meet their maturing obligations
as they fall due without resorting to the CBN or the inter-bank
market.
Further checks revealed that the outstanding balance on the EDW
of the five banks amounted to N127.85 billion by end July 2009,
representing 89.81 per cent of the total industry exposure to the
CBN on its discount window while their net guaranteed inter-bank
takings stood at N253.30 billion as at August 2, 2009. Their liquidity
ratios ranged from 17.65 per cent to 24 per cent as at May 31, 2009.
The banking regulatory minimum is 25 per cent as spelt out by the
apex bank.
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