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Financial advisers to troubled banks prepare staff for public enquiries

By OMOH GABRIEL Business Editor

FINANCIAL advisers appointed for the four troubled banks in the second phase of the banking reform have issued a public communication guideline for the management and staff of the affected banks urging them to continue to insist that the banks are healthy and in sound financial condition. The financial advisers are Deutsche Bank, Chapel Hill and Stanbic IBTC Bank. But the CBN in axing the banks chief executives had said that the banks were in grave situation.

This is coming on the heels of the finance minister, Dr. Mansur Muhtar, restating government’s position on the troubled banks saying that government will only take equity in the banks if all other attempt at recapitalising the key banks affected fails. In the holding statement issued by the three financial advisers to all staff of the banks, they were directed to continue to say “Our bank is strong and has enough capital and liquidity.” The guideline reveals that it was agreed between the regulators and the advisers that the following short holding statement should guide responses from staff when answering questions from the public that “The special examination was undertaken by the CBN, all questions about it should be addressed to the banks’ advisers,” but must state that “the CBN has announced that our bank is strong and has enough capital and liquidity to support itself now and in the future, we are continuing to work normally and we have benefited from the successful actions of the CBN to maintain stability in the banking sector.

“We intend to remain a major player in Nigeria’s banking sector and we are looking at a number of ways of increasing capital and liquidity, and improving the corporate governance of the bank to support the development of the bank in the future. And for the top management they should just say it is too early to comment on these as we review them, together with the CBN, when we have some news about our decisions we will certainly inform you.”
The holding statement issued by the advisers titled ‘Procedure and guidelines for dealing with enquiries from the public’ also said “Following the statement by the Central Bank of Nigeria (CBN) on October 2, 2009, on the results of the second phase of the special examination, it is anticipated that staff and management of our bank may receive enquiries from members of the public (“related enquiries”). In this regard, the appointed financial advisers, Deutsche Bank, Chapel Hill and Stanbic IBTC Bank, have agreed that for the purpose of preventing the dissemination of inaccurate information, the key information summarized below should be highlighted when dealing with such anticipated enquiries:

The special examination primarily focused on three areas: liquidity, capital adequacy and corporate governance; provision of N200 billion by the CBN as liquidity support and long term loans for the four newly affected banks has enabled them to continue normal business while pursuing recapitalisation plans; the first phase of the process of restoring financial sector stability is complete, with ongoing action to focus on, building capacity within the regulatory regime, improving risk management frameworks, easing the flow of credit, particularly to the real sector of the  economy, improving governance structures and practices in the financial services industry, improving confidence in the economy in general, deposits of all the banks, including the affected banks, remain guaranteed, the management of the bank, with support from the CBN, are exploring options to ensure robust capital adequacy, enhanced liquidity; and establishment of adequate and good corporate governance practices, advisors have been appointed to assist in this task” the guideline directed. It also said that staff should keep informing the general public that the interest of all stakeholders will be considered, while ensuring that CBN’s over-riding objective to promote a banking system that is sound, stable and efficient is met. The CBN and respective banks will update the market as appropriate on progress relating to the evaluation of the options.

Meanwhile, the minister of finance, Dr. Mansur Muhtar, has reiterated government position on the troubled banks saying that government, in the event that some of the affected banks are unable to recapitalize and successfully go through a merger and acquisition exercise, the government may acquire shares in such banks, if they are deemed systemically important.

He said: “Government’s policy position with regard to the restructuring of banks, as enunciated by the minister of finance, Dr Mansur Muhtar and governor of the Central Bank of Nigeria,Alhaji Sanusi Lamido Sanusi, during the annual meetings of the International Monetary Fund and World Bank Group, is that in the event that some of the affected banks are unable to recapitalize and successfully go through a merger and acquisition exercise, the government may acquire shares in such banks, if they are deemed systemically important. Thereafter, government equity will be sold at the earliest possible opportunity.

“Successful bank restructuring entails preserving the payment system, assuring that there are functioning banks, and that the residual troubled assets are managed and disposed appropriately. We would like to emphasize that the Federal Ministry of Finance and the Central Bank of Nigeria would be guided by these three objectives in the on-going exercise of building confidence in our banking sector as well as ensuring that it is safe, sound and transparent. Both the minister of finance and the governor of CBN have had various productive meetings on the issues facing the banking sector. The Federal Ministry of Finance and the Central Bank of Nigeria are coordinating efforts with a view to ensuring that our banks become more resilient and sound. The institutional framework for coordination among regulatory agencies under the Financial Sector Regulations Coordination Committee (FRSC) is being strengthened. On different occasions, the minister of finance had mentioned the strong endorsement by the government of the actions taken by the Central Bank of Nigeria to restore confidence in the system. We would like to reiterate the commitment of the Federal Ministry of Finance and the Central Bank of Nigeria to working together towards strengthening the banking system so as to ensure that it continues to contribute to the development of our economy.


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