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Family-controlled banks, so what?
FESTUS AKANBI
Just like a stubborn sore that refuses to heal, the anxiety raised by the Central Bank of Nigeria�s (CBN) 15-point reform agenda, two months ago, has continued to haunt the financial sector of the economy.
Expectedly, not a few bank operators have continued to arch a skeptical eyebrow at the reform, which the initiators said would position the industry for the challenges of modern day economy.
There is no doubt that one of the most interesting fallouts of the ongoing review of banking law is the rapidity of the issuance of information on how some of the affected banks plan to meet the new deadline, although some industry watchers have described the road map to the promised land of some of these banks as mere products of desperation to ward off the impending cash run on their organizations by panic-stricken customers.
Most business editors of the leading newspapers in the country have been bombarded with press releases on how the affected banks plot to hit the N25billion mark.
Some more desperate ones have even begun a campaign; ostensibly to compel the financial authorities to urgently beat a retreat over the banking rules introduced a few weeks back. It was an urgency that even, many informed financial analysts, sweetened with a few more juicy titbits, were eventually persuaded to accept.
As the campaign for the reversal of the new policy gathered momentum, the CBN has never failed to explain why it has to announce the drastic step, unarguably the first of its kind in the history of the nation�s banking sector.
Going by the CBN�s arrangement, the N25billion capital base would not only enhance the capacity of banks to adequately perform their role as the engine of the economy, but it would loosen if not outrightly remove, family grips from those banks that are able to cross the Rubicon at the expiration of the 2005 deadline.
In view of the controversy being generated by the new banking policy, one government official mostly sought for is the CBN�s Deputy Director, Corporate Affairs, Mr. Tony Ede.
So, when the bespectacled, bulky chief image maker of the apex bank surfaced at the Punch headquarters in Ikeja on Wednesday, August 18, 2004, one of the issues he emphasized was the resolve of the apex bank to put a stop to the era of family banking in the country. Some of the family owned banks in the country include First City Monument Bank, Lead Bank, Societe Generale, andDevcom Bank.
The CBN, according to Ede, is not actually against the owners of the banks. �The new policy is not directed at any bank executive. It is an outcome of a programme long thought of and the instructions just have to be carried to the letter,� Ede told Sunday Punch.
But what happens if a particular bank dynasty is able to raise its bank�s capital base up to the N25billion specified by the CBN? According to the apex bank�s deputy director, �such a situation would be unacceptable. A lot of illegalities are being perpetrated by some banks� chiefs by the virtue of the structure of their banks.�
Ede pointed out that in all the cases of distress in banks, none of the owners of the affected banks has suffered any losses. They are quick to take their money. It�s only the small savers that bear the brunt.�
The CBN spokesperson, who disclosed that no fewer than 12 banks were already at the verge of collapse before the CBN�s change of policy few weeks back, said that there is no going back on the CBN�s insistence on the widening of the ownership structures of banks still willing to operate in the country.
�We are all aware of lots of insider dealings going on in some of these banks. The undue influence of the owners of such banks has made it difficult for them to operate according to the rule. We all know what happened recently in one of such banks. When we invited the bank�s chairman to explain the problem, he exonerated himself, saying he was not at the meeting where the offence was committed and when we saw the minutes of the meeting, his name was not there. But we all know the antics of some these banks. They would rather sacrifice junior officers, may be a desk officer when they are called upon to defend their actions.�
It is in consideration of these developments that the CBN, according to Ede, is insisting that it is not a matter of meeting the N25billion capital. �It is a matter of how you made it. This is why we are encouraging merger and acquisitions,� he explained.
The tough stance of the monetary authorities is also being felt by some banks, which hitherto had shown reluctance to open their gates to other investors. Ede was quick to sound a note of warning. There is nothing like group banking. The banks must come out as a single entity, apparently referring to some banks wishing to restrict their coast to few of their subsidiaries.
However, the CBN�s position is not shared by some of the affected operators. For instance, a bank like the First City Monument Bank (FCMB), its Deputy Managing Director (who incidentally is the son of the founder of the bank), Mr. Ladi Balogun said appropriate measures have been put in place to make sure that the institution survives without its founder. �The issue now is not about Otunba Subomi Balogun. He has paid his dues in the entire financial sector of the country. The bank is well structured and I can assure you that we have been complying with the CBN�s guidelines.
Although efforts to speak with the chief executive officer of Lead Bank plc did not pay off as at press time, an insider source said the bank ownership has nothing to do with its business. According to the source, �the bank operates a specialized banking operation, a development, he attributed to the closed ownership structure of the bank.�
What would now be the fate of the bank in the face of the apex bank�s resolve to end the era of family banking? The source hinted that Leadbank has begun consultations with other banks with similar visions for the possibility of a merger.
Financial analysts argued that with the flow of investment into the country in the recent time, the era of family banking may actually have been over. �If we are serious about our quest to attract foreign investors, our banks must be strengthened with proper machinery put in place to ensure compliance with the CBN�s laws,� remarked Mr. Ade Adenrele of the Adepoju Adenrele firm of Investments Consultants, based in Lagos.
He argues that although some of the owners of t he affected banks are aware of the inherent dangers of holding tight to such banks, they may maintain their hold out of their exaggerated loyalty to clients or misplaced zeal to outlast competitors.
But are all family-owned banks doing badly? Must the CBN throw away the bath water with the babies? These are some of the questions being asked by a frontline industrialist, Otunba Mohammed Jobi-Fele in a statement last weekend.
According to the former chairman of O�dua Investments, there is nothing bad in raising bank�s capital base since this will strenghten the banking sector.
�There is nothing wrong with family ownership of banks because there is an inexaustible list of one-man establishments like universities, companies as well as multinationals that have done well and are still doing well till date�, Jobi-Fele argued.
He noted that companies like Guninnes, Mike Adenuga Group of Companies and Banks, Honeywll Group, Nestle and a host of others started as one man business.
Sunday PUNCH August 29, 2004
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