Banks begin selective implementation of cash withdrawal limits

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By Babajide Komolafe and VICTOR AHIUMA-YOUNG

Six months to the commencement of the cash withdrawal/deposit limit imposed by the CBN, some banks have commenced selective implementation of the policy barring cash transactions by some organisations.

Meanwhile, the organised labour in the banking industry has condemned the recent statement of the Central Bank of Nigeria (CBN) on the financial health of the rescued banks, saying the apex bank is “playing to the gallery.” Labour said that it has taken a holistic examination of recent policy pronouncements by the Mallam Sanusi Lamido Sanusi-led management of Central Bank of Nigeria and declared that the policies are anti-Nigerian economy that must be halted before they cripple the economy.

Labour under the umbrella of the Association of Senior Staff of Banks, Insurance and Financial Institutions, ASSBIFI, described Sanusi’s statement on CBN’s planned liquidation of the rescued banks and its wider implications for the economy as dangerous and self-seeking and will seriously harm the economy and the larger Nigerian population than the few that designed and are pushing the policy through.

Last month, the CBN introduced limits of N150, 000 and N1 million on free cash withdrawal and deposit for individual account holders and corporate bodies respectively. Consequently, it imposed charges of N100 per N1000 for individuals and N200 per N1000 for corporate bodies for cash transactions above the limits. The limit, according to the CBN, is to reduce the cost of cash processing in the industry.

Although the apex bank said that the policy would commence December with a pilot scheme in Lagos, which would be extended to Port Harcourt, Abuja and Kano by June next year, some banks have started selective implementation of the policy, which also banned banks from offering free cash pick services for customers. Sources said the CBN in a hurry to implement the policy, has encouraged banks to start the implementation as no bank can do such a thing without clearance from the CBN.

M. D Bank of Industry Ms. Evelyn Oputu (r); the Chairman Bank of Industry ,Alhaji AbdulSamad Rabiu and the United Nations Resident Representative in Nigeria Mr. Daouda Toure discussing at the formal Launching/ signing ceremony of Access to Renewable Energy (AtRE) Project between the Bank and the UNDP at the U N Building, Abuja.

Indications to this emerged last week when a bank  (name withheld) issued a memo to its BDC customers telling them it would no longer allow cash transactions on their account but bank draft.

The memo titled: No more cash lodgement for BDC transaction, stated: “Please note the following important information on your account with us which we have introduced in order to serve you better. Effective 15th of June, 2011, ONLY Certified Bank Drafts will be acceptable means of payment for BDC purchases. Cash lodgment for BDC transaction will no longer be accepted.

Transfers of cash lodgments from other account types into BDC accounts for the purposes of transacting purchases is also NOT acceptable. This new policy will enable us serve you better and faster.

We assure you of our commitment to ensure a smooth processing of your transactions without disruption or delay to your operations. Thank you for your understanding and co-operation.”

A top official of the bank, who pleaded anonymity, told Vanguard that the directive was an internal memo to staff to encourage customers to use alternative means of payment instead of cash and the aim is to reduce cost of cash processing for the bank.”

Meanwhile, the Association of Senior Staff of Banks Insurance and Financial Institutions has condemned the policy that limits free  cash  transactions saying: “It is another policy fraught with danger”.

In a statement by Comrades Emeka Ogene and O. P Orere, President and Secretary- General of ASSBIFI affiliated to Nigeria Labour Congress, NLC, lamented that the controversy trailing the recent pronouncement by CBN to limit cash withdrawal in the country, had died down when it threatened to liquidate any of the eight rescued banks it intervened into their management last year unless certain options are urgently taken before 30th September, 2011.

According to the association, “We are not averse to the recapitalisation of any technically insolvent bank, because the nation needs healthy banks for sustainable economic growth. But, the first question that comes to mind is, were the banks given these options in the first place to recapitalise after the reported forensic examination of their books in 2009? It is also important to know if the apex bank followed due process before sacking the then directors of these banks. We are aware the results of the examinations were not laid before the then boards of these banks, in line with BOFIA, before they were sacked.

The essence of this would have been to give them the opportunity to defend their actions and take steps to correct all observed errors within a statutory period, failing which the apex bank would have requested a competent court to order an extra-ordinary general meeting where the Central Bank would have advised the shareholders to replace them (the erring directors). You will recall that the reports with which CBN took the decisions on these banks were leaked to the Press before they were made public in August, 2009, that led to a serious runs on the banks which they are yet to recover from.

“The recent pronouncement has further created fear in the minds of the banking public, especially the undiscerning, thereby putting the banks in more precarious financial positions.

The many utterances of the leadership of the Central Bank on the state of these banks has become embarrassing and made us wonder if there was no preconceived intention to actually liquidate these banks irrespective of their financial health. Such sensitive statements were not made against some favoured banks which were given more than three years to recapitalise. What was the reason for the change in tactics? Could it be because these banks were principally owned by regional Governments and peoples while the so-called rescued banks are owned by some powerless individuals?  If these rescued banks must remain in business, the Central Bank must desist from openly calling the banks’ customers to withdraw their patronage.

This calls to question the professionalism of the CBN management. No business is too big to fail, but some of these banks really had no problems in the first place to warrant any CBN intervention. The records available to us clearly show that one of these banks was declared illiquid because of facilities to three customers, two of which were sovereign debts. We wonder why a bank should be declared illiquid for financing government-guaranteed projects. Before the intervention of the lender of last resort, this bank had been meeting its obligations and about 58% (N70bn) of the intervention fund given to it by the apex bank was invested in Government bonds while it used the balance to offset its inter-bank debts.”

Bail out, credibility CBN-appointed management teams

The body said it was very surprised that the CBN was bragging about the fund it sunk into these banks in the name of bailout.

It said; “As a lender of last resort, the CBN owes it as a duty to any bank to assist it financially when in need. We therefore do not see the reason for all the noise about the apex bank doing its job. This happens all over the world. But the question still remains: Did all the banks need the bailout fund?  In our opinion, and in view of the recent revelations, some of these banks did not need any intervention, financially or otherwise. This is just giving a dog a bad name in order to hang it. The ousted management teams of the eight banks were accused of lacking in corporate governance, among other charges.

There may, undoubtedly, be some truth in the allegations because of our human nature. But, is the situation better now?  In an advertorial in a national newspaper of Friday, June 10th, 2011, the Central Bank boasted that it replaced the then Chief Executive and Executive Directors of the eight banks with ‘competent managers with experience and integrity.’  Nigerians, especially members of the Press, are in a very good position to confirm or challenge this claim. Nigerians must have all read the expositions in some Newspapers in the last three weeks of the shady transactions being carried out in some of the rescued banks by the ‘competent managers with experience and integrity’ appointed by the Central Bank.

With such expose, you will not but wonder if the apex bank really wants these banks to survive. It is on record that the Central Bank took only two months (June and July, 2009) to examine the books of 24 banks before choosing the famous eight, but it is yet to discuss the report of its investigation into any of the rescued banks after the reports on them were submitted. We implore you to take advantage of the Freedom of Information Act to exhume these reports in the interest of the public. “

Threat to liquidate eight banks

ASSBIFI said “In its usual characteristics, the apex bank declared that these banks recorded various NEGATIVE ASSET VALUES in the year ended 31st December, 2010 totaling N1.28 trillion, and quoted the figure for each bank in the newspaper. Frightening as these figures may be, the question is whether they actually represent the true state of these banks, or were they manipulated to give the impression that they are beyond rescue and therefore, must be liquidated? . What will happen to the bail-out fund of N620 billion if this threat is carried out? Can the nation cope with the unemployment and other vices that may arise therefrom?  In order to justify the handover of these banks to them, their management teams will do anything to keep giving the public the impression that they are doing a good job by continuously painting the banks in bad light.  Can it be said therefore that all these banks have “holes in their balance sheets” as claimed by CBN? You need to probe deeper to save the country from this glaring embarrassment. We can also tell you authoritatively that one of the banks (UNION BANK) made a profit of N118.016bn in the year ended 31st December, 2010.

After it has fully provided for the previous loss of N286.168bn in the nine months/year ended 31st December, 2009. We know that some of the other banks equally made profits. If these banks are given enough time to recapitalise, they will surely bounce back to their original heights, if not higher. In our considered opinion, since you cannot shave a man’s head in his absence, the recapitalisation of any of these banks without the involvement of its shareholders is an aberration.

“However, the CBN seems set to do this as it did not recognise the rights of shareholders to manage their banks both before and after its unsolicited intervention. We are all aware of the problem the automotive industry had in the USA and how they were bailed out without much ado. Today, those companies are posting more profit than before. Why is the CBN playing to the gallery in the case of the Nigerian banks? What did it actually intend to achieve? Did it set out to cause a run on these banks so that they die on their own or did it really intend to save them? We wonder. We believe the shareholders cannot be pushed aside while their banks are being recapitalised.

In the same way, we are convinced that the processes will be smoother if organised labour, as in the Power sector (PHCN) is involved in that sector. This will ensure the proper treatment of all labour-related issues in the various Memoranda of Understanding, for a harmonious working environment to prevail. As a regulator, we expect the Central Bank to set the guidelines and give the shareholders and managements of the banks a free hand to recapitalise the banks, as anything to the contrary will confirm the fears of the Shareholders and all reasonable members of the public that it has the intention of cornering the banks for a chosen few. Time will tell.”

Vanguard Newspapers’ March 2009 report

The statement argued that with the way the Central Bank is handling the affairs of the rescued banks, “we are tempted to ask certain questions; what gave rise to the choice of September 30th, 2011 as the terminal date for the recapitalisation of these banks?  Why is the CBN threatening shareholders with forceful liquidation of their banks? Are these banks as bad in shape as they are being painted?  Why has the CBN not made any pronouncement on the various allegations of corporate governance breach and outright looting going on in some of these banks? Why is CBN creating panic in the industry less than two years after assuring the world that our banks are safe?  Why will the CBN choose the electronic and print media to communicate policy issues to banks?  How does the apex bank intend to recover its bail-out funds if it liquidates these banks?  Does the CBN not realise that the forceful entry into these banks and the threat to liquidate them is sending the wrong signal to foreign investors that a government official can wake up one day to take over their investment in Nigeria? Why are the supervising Ministry and the Presidency adamant to the cries of both the workers and shareholders of these banks, despite the sordid revelations on the activities of their current management teams?

“These questions and many others need to be addressed to move the country and the financial sector forward. The CBN appears to be giving credence to the report in the VANGUARD NEWSPAPER of March 23, 2009 which said that “anti-consolidation forces have regrouped with the hope of dismantling the structures and forcing a takeover of the top five banks in the country. The group plans to cause panic and uncertainty in the industry and make the target banks look unsafe for depositors.”

Daily cash withdrawal limit of N150, 000

Commenting on the planned daily withdrawal limit, the association noted that “the announcement by CBN that effective June, 2012 no individual or organisation will draw/deposit cash of more than N 150,000 or N1000,000 per day, is another policy fraught with danger. However, Lagos will be used to experiment its effectiveness from December, 2011.  This policy is not bad on the surface, but it is not likely to work now but in the future. This is because our economy is cash-driven for now, coupled with the low awareness of the majority of Nigerians on cash transactions. The implication of this is that people will continue to ignore cash dealing with the banks and this has far reaching implications. We urge the Federal Government to look into this policy and advice CBN appropriately, or make a clear pronouncement of how Government intends it to work, if it has consented to it.”

On the categorization of bank, ASSBIFI, argued that the categorization of banks along International, National and Regional lines was another policy somersault that seemed to have been designed to help the CBN achieve an early liquidation of the eight banks.

According to it, “this is because depositors will not be comfortable having their funds in any bank that does not belong to the international category. Worse still, this is coinciding with the CBN announcement that some of these eight banks would be liquidated by September 2011 if their shareholders fail to withdraw their suits now in various courts against unholy alliances. Does this show that the apex bank is interested in rebuilding the banks and improving our already battered economy? We want to alert the public that from experience this is another way of causing further distress in the industry as the customers of both regional and national banks will soon seek refuge in only the international banks.”

Guarantor for bank staff

The body said “another policy that we consider obnoxious is the issue of banks insisting that new employees must get guarantors from millionaire members of the public before their services are engaged. The banking industry is very unique because the jobs in any bank are linked like a bicycle chain which must not snap if there must be a smooth ride. An error committed by one staff easily affects others but the banks have internal mechanisms to address such errors. Why then would an applicant be asked to get a millionaire guarantor before he is employed? For avoidance of doubt, these guarantors are not the same as the normal referees required of new employees.

“These guarantors are expected to sign undertaking that they will be willing and ready to pay certain sums of money not below N2 million in respect of any of the new employees should such a person leave the job within two years or commits a fraud, or any mistake for that matter. This policy is discriminatory in the sense that applicants who may be better qualified but do not have millionaires as relations or friends cannot get employed in the banks. Why should the CBN keep a blind eye to such retrogressive acts by the banks? We therefore expect the CBN to call on the managements of all banks to stop this wicked policy which is dangerously creeping into the insurance industry.”

The statement added “we expect the CBN to take a second look at these anti-national policies with a view to resuscitating our ailing economy instead of pushing it further into the abyss. We urge the supervising Ministry and the Presidency to critically look at these issues patriotically instead of leaving them in the hands of uninformed and biased regulators.”

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