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4 banks get CBN’s N200bn bailout this week

By Babajide Komolafe & Michael Eboh
LAGOS — The Central Bank will, this week, disburse N200 billion bailout fund to the four banks which failed the second round of the apex bank’s audit report, recently.
The banks are Bank PHB Plc, Spring Bank Plc and Equitorial Trust Bank Limited and Wema Bank Plc.

The Chief Executives and Executive Directors of three of the banks were sacked following the failure of the audit report, however, the chief executive of Wema Bank was not sacked by the apex bank.

Meanwhile, the Nigerian Stock Exchange, NSE, yesterday, lifted the technical suspension placed on the shares of BankPHB Plc and Spring Bank Plc.

This was after the expiration of the one week period announced by the NSE for the suspension of the shares, to prevent a run on the share prices of the banks.

According to a statement by Mr. Sola Oni, spokesperson for the NSE, the decision to lift the suspension was jointly reached by the Securities and Exchange Commission, SEC and the NSE, as both bodies are convinced that issues leading to the suspension have been addressed.

Following the lifting of the technical suspension, the share prices of both banks recorded significant decline, with Bank PHB’s share shedding N0.16 to close at N3.17 per share while Spring Bank’s share dipped by N0.14 to close at N2.78 per share.

It would be recalled that the CBN while announcing the outcome of the second phase of the banks’ audit said it would inject N200 billion into the banks as liquidity support.

Vanguard’s investigation however revealed that two weeks after the pronouncement, the four banks were yet to get the bailout money.

A top CBN official who spoke on condition of anonymity however told Vanguard yesterday: “The paperwork for all banks is being concluded today (yesterday)  for full disbursement this week.” The apex bank, it was gathered, preferred that the banks use the money to buy treasury bills and bonds to improve their liquidity ratio and the repo securities if they need cash.

Vanguard’s investigations revealed that the apex bank was initially in a dilemma over the modalities for the release of the bailout fund and this occasioned the delay in releasing the money.

Vanguard was reliably informed the N400 billion injected into the five banks whose chief executives were sacked in the first phase of the banks’ audit, was released through the Standing Lending Facility, SLF, of the apex bank.

This was however criticised by some CBN officials who agued that since the SLF is a short term instrument, it was wrong for the apex bank to use it to grant long term loan.

This position, it was gathered, was made known to the board of governors of the bank during a meeting with top officials of the bank. During the meeting which is known as Governors’ Consultative Forum, some top officials said that the modality used was not only wrong but also illegal and against central bank practices all over the world.

The officials, it was gathered, noted that nowhere in the world does the central bank grant long-term loan to banks.

It was also gathered that initially the bailout money was treated as an off-balance sheet item and this was also criticised as illegal.

Investigation revealed that the decision to reclassify the bailout fund as balance sheet item followed enquiries from the International Monetary Fund, IMF, seeking clarification why the balance sheet of the apex bank did not include the bailout money.

These challenges, it was gathered  slowed down the release of the bailout fund to the four banks as the apex bank had to battle with the proper means of releasing the money to them without contravening global best practices.


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