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Capital
base: Senate okays banks� ranking
�Banks
lose N260b to bad debts � NDIC
By Mojeed Jamiu, Sanya
Adejoku,
Esan Sunday (Enugu), and
Adetutu Folasade-Koyi (Abuja)
In
a unanimous voice vote of �aye�, the Senate on Thursday approved the
categorisation of banks into mega, medium and small categories, despite the
policy of the Central Bank of Nigeria (CBN) that the new N25 billion capital
base applies across the board.
The
CBN was slammed for not consulting with stakeholders before making the
pronouncement, which, if implemented, would lead to more than 50,000 job
losses in the financial houses.
To
add to their worry, banks are currently groaning under the heavy yoke of
N260.17 billion bad loans and most of which may never be recovered, says the
Nigeria Deposit Insurance Corporation (NDIC).
The
problem is compounded by the fact that most of the loans were products of
insider abuse or were granted under fraudulent circumstances, evidenced by
poor documentation and collateralisation.
NDIC
Head of Legal Department Alheri Bulus Nyako made the disclosures in Enugu on
Thursday in a paper he delivered to finance correspondents and business
editors at the 2004 annual retreat organised by the corporation.
In
Abuja, Banking, Insurance and Financial Institutions Committee Chairman Zik
Ambuno has disclosed that a public hearing would soon be held on the Banks
and Other Financial Institutions Act (BOFIA) Decree No 40 of 1999 (Amendment)
Bill. Stakeholders, including the CBN, banks, and other financial
institutions would be invited.
Ambuno,
who led deliberations on the bill, said: �The present law recognises
categorization of banks. In fact, in the proposed amendment sent by the CBN
to the committee, the apex bank is requesting cancellation of categorization.
This has not been done yet. Categorisation can take many forms.
�There
appears to be inconsistency on the part of the Central Bank and it is the
view of the committee that the pronouncement should not have been made
midstream�.
Besides
the vote, several senators expressed similar views on the categorization of
banks.
Deputy
Senate Leader Jonathan Zwingina praised the committee for a job well done,
but berated the CBN for misusing its authority.
Senate
Chief Whip Udoma Udo Udoma urged the committee to define whether the N25
billion is meant for shareholders� funds or paid up capital.
Senator
Nicholas Ugbane (ANPP, Kogi) supported the ranking, arguing that there is �no
country that does not have intermediate banks. Mr. President, we should
condemn this policy and go ahead to implement the recommendations of the
banking committee�.
Senator
Olorunnimbe Mamora (AD, Lagos) expanded his own anaylysis. He believes the
economy cannot withstand the N25 billion directive and, as such, would affect
not only the economy but also Nigerians in the long run.
Senator
Aba Aji urged the Senate to stand by its recommendation while Senator Ken
Nnamani spoke of the dangers inherent in the new capitalisation. �We should
be prepared for the dangers that follow categorisation in such an economy
like ours. It just does not make sense for all banks to have a capital base
of N25 billion�.
Explaining
the bank�s bad debts in Enugu, Nyako blamed part of the problem on the
cumbersome judicial characterised by endless adjournments, undue reliance on
technicalities, frivolous interlocutory appeals and other cases of outright
abuse of court process.
�Unless
the National Assembly passes the BOFIA, which would establish special courts
to try failed banks, the corporation and the banks would continue to face
difficulties in the recovery of bank debts�.
Nyako,
also Secretary to the NDIC board, recalled with nostalgia the period between
1994 and 1999 when the Failed Banks' Tribunals tried those offences and
described them as �glorious years� for the effective discharge of NDIC's
function as liquidator of failed banks.
To
him, the police, lawyers and judges all have conspired to encourage bank
directors, bankers and bank customers to circumvent the rules and avoid
justice.
Also
on Thursday, President of the Nigeria Institute of Bankers (NIB) Simeon
Kolawole disclosed that former Managing Director of the Bank of the North
Bulama Manu has been suspended from the body pending the determination of his
court case.
Bulama
was sued by both the CBN and the NDIC for violating banking regulation and
for engaging in fraud, which resulted in crisis in the bank.
Kolawole
said he would also face the NIB disciplinary committee for misconduct after
the court case.
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