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FG, CBN to mobilise N250bn for bad loans

By Emma Ujah & Innocent Anaba

ABUJA — THE Federal Government and the Central Bank, CBN, are to provide a fresh N250 billion to buy back bad debts of banks under the ongoing banking reforms through the proposed Assets Management Company, AMC.

The Director of Banking Supervision of the CBN, Mr. Samuel Oni, disclosed at the end of yesterday’s Bankers’ Committee meeting in Abuja that the AMC, which Bill would soon be sent to the National Assembly by the executive, would provide further liquidity for the banks.

According to him, the company with the N250 billion capitalisation would be owned by the CBN and the Federal Ministry of Finance on a 60:40 ratio.

His words: “the AMC is a national project and we are looking at a situation that no bank is allowed to fail in spite of what has happened on the international scene. The idea of the AMC is actually to absorb the overdose of bad loans and then it can issue bonds to banks.

“The capitalisation of the AMC is proposed to be N250 billion to be contributed by CBN and the Ministry of Finance in the proportion of 60 and 40 percent respectively. It is hoped that AMC will be alive for 10 years after which it would have completed the objectives to which it was set up.”

He said that with the AMC arrangement, banks which have been wary of giving out loans to borrowers would be more liquid and be prepared to lend to genuine businesses with bankable projects.

“The fact of banks not lending should be linked to CBN injecting N500 billion into the system which would enable banks to ripple the promissory notes that they are presently carrying either from the Ministry of Finance or from the purchase and assumption mechanism. I strongly believe that if genuine businessmen who have bankable projects approach banks, they will be able to assess funds. But banks these days are more careful about who they lend to, to ensure that what happened recently never occurs again”, he explained.

There has been an outcry by private sector operators over banks’ refusal to either give out new loans or even continue to fund existing projects which they initially agreed to fund.

On the establishment of credit bureaux, the director revealed that two firms have been licensed and were already operational, providing banks with information on individuals and corporate organisations that apply for loans.

He added that CBN also granted a third firm approval-in-principle and would “continue to support them both from the regulatory and any other support necessary, in terms of up scaling the skills”, adding, “we have even also agreed that the present CRMS we have be uploaded to them.

“Some of them have actually populated their database in terms of the customers that they are having. I want to say that it is good that we are getting somewhere in terms of credit reference information system.”

In his own remarks, the Managing Director of Skye Bank, Sola Akinfemiwa, said the banks which had their top executives replaced recently by the CBN could not give loans yet, as according to him, “there are things these banks have to do before they go back into doing business. What has happened is not such that you go in as a new Managing Director and start giving money out. In those eight banks or so, you will probably see some slowdown in the process.

Sooner than later, I believe that we are going to go back to business.”

Also contributing, the Managing Director of Standard Chartered, Mr Christopher Knight, said five more banks have been approved by the CBN to participate in the N200 billion Federal Government Agriculture Loan scheme.

“The second tranche of the Commercial agric loan worth about N100 billion is about to be disbursed. N40 billion would be distributed through the states and N60 billion through the participating banks including Union Bank, Fidelity Bank, GTB, Zenith and Unity Bank.

The CBN, he said, will be looking closely at the operations of the banks to see if they have been living up to their promises.

Asked to comment on reports that certain interests were already rooting for a takeover of Union Bank, its MD, Ms Funke Osibodu said she was not aware of any such arrangement.

She added however that, “for all banks, especially the banks that require recapitalisation, there will be a process, an open and transparent process for various methods of recapitalising the various institutions.

I think even, specifically today, at the Bankers’ committee, it was discussed that any of the banks that has interest in any way in any of the banks should feel free to table it, so that the whole process will be a very open process.

“Specifically on Union Bank, there is nothing like that, but there are parties that definitely are interested in both the 8 banks and other banks.  It is an on-going process”.

Atuche,  Ojo granted bail

Meanwhile, the former Managing Directors of Bank PHB and Spring Bank, Francis Atuche and Charles Ojo, Managing Director of Spring Bank Plc and also a former Executive Director of Bank PHB, who are standing trial over allegedly granting of over N460 billion frivolous credit facilities without security, were yesterday admitted to bail by a Federal High Court sitting in Lagos.

Trial judge in the matter, Justice Akinjide Ajakaiye, in his ruling, held that the grant of bail was at the discretion of the court, which must also be based on the material placed before the court.

The judge held that there was nothing to show by the prosecution that the accused persons would jump bail as their international passports are with the EFCC, nor was the prosecution able to show that they have criminal records or questionable characters.

The court, meanwhile, admitted the accused to bail in the sum of N50 million each, with a surety in like sum. And the surety according to the court, must have a landed property on Victoria Island or Ikoyi, Lagos, adding that the bail was made to compel the accused to attend trial and not to serve as punishment.

The judge said that the accused persons should not be punished before their conviction.

The court held that having carefully gone through the affidavits and counter affidavits and submissions of counsel, bail pending trial should not be rigorous unless there were cogent reasons for that.

Further hearing in the matter has been adjourned till December 14, 15 and 16 of this year.


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