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Forex Deals: Some Banks Being Probed – CBN
From Ayodele Aminu and Kunle Aderinokun in Bauchi, 12.01.2004
Central Bank of Nigeria (CBN) has confirmed that it is presently investigating some banks over foreign exchange malpractices. It however did not disclose the number and identity of the banks. It also vowed not to extend the December 2005 deadline given to all banks in the country to raise their capital base to a minimum of N25 billion. CBN Governor, Professor Charles Soludo, made these known yesterday in Bauchi at the opening ceremony of the 6th CBN Seminar for Finance Correspondents and Business Editors. "We are not going to name any bank but we can confirm that there are a number of banks that are currently under investigation and once we are able to prove it conclusively, we would apply the penalties prescribed including possibility of revoking the foreign exchange licence of the banks concerned and black-listing of those involved," he said. Asked to shed more light on why CBN recently raised alarm over the issue of round-tripping and for it to substantiate the claims, he explained that the apex bank has its unique way of having a first hand information about the developments in the banking industry. "It is not a vague alarm. It is not just what we cooked up. We did not raise such alarm two, three or five months ago. So, for us to raise such alarm now means that we have basis to begin to say that we heard that such things (round-tripping) are happening. "We have our own ways of getting information from the market as to what is happening. We also have other information channels such as whistle-blowing and market intelligence. That is a market that we regulate and we work in, so we get regular information and when we get this kind of information and the trend, we have people now in the field to verify to be able to pin down the erring banks," he stressed. On the likely extension of the recapitalisation deadline, Soludo insisted that CBN would not and does not have any plan to extend the December 31, 2005 deadline. "I can tell you categorically that we are not going to extend the deadline. There is a way these things work. There are those that are only seeing the constraints and there are those that are making appreciable progress. "The former believe that they cannot work within that time-frame, while the latter have taken a number of steps to move forward. In fact, we know several banks that are even on the verge of meeting the new capital alone or even those that have met it and are on verge of acquiring others. About 9-10 banks have already signed MOU. "By the first quarter of next year, you would see the dynamics of everything and for those who continue to hope and wait for a shift, they should know that it is a joke. I can assure you that there is nothing that would make a shift in the deadline," Soludo assured. While describing the strategy deployed by some banks which are beefing up their capital before going into mergers as a good development for the industry and the economy at large, he warned of the imminent danger if every bank adopts such strategy. "Many banks have adopted the strategy of raising their capital before going into consolidation. We wish them good luck even though we try to remind them that time is not on their side.
"The good side of it is that everybody raise money before going into consolidation, there would be more banks post-consolidation. The other good news is that a lot of money under the mattresses or abroad would now begin to show up in the formal economy. We have been told people are now repatriating their money, especially those who have major stakes in some banks. The Nigerian economy is the winner. "The downside as I have also tried to alert some of them is that whereas it is good for you to raise it (capital) to a level, part of the motivation on the part of some people is that they want to retain their brand names. They want to raise their capital to a level and then look for a bank to acquire. "But the bad news is that if people adopt the same strategy by the time everybody have raised their capital to a certain level, there would be only bachelors in the room with no wife to marry and that might be a little bit tricky since everybody would be looking for a bank to acquire so as not to change their identity. "The Nigerian public would obviously begin to vote with their feet and begin to look around to find out which banks are not likely to make it, especially since the CBN too would begin to announce the various stages where banks are. And once people begin to vote with their feet the franchise of some banks would begin to go down," he remarked. He however assured that CBN would ensure that no bank is left behind after the consolidation. "We are doing everything possible to make sure that every banks sail through. We are closely monitoring banks to avoid people become desperate to engage in asset-stripping. We are trying to get the asset management bill enacted into law, it is being fine-tuned and finally now being presented to the National Assembly for enactment into law," he assured.
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