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Banks under probe for bunkering - Soludo
• CBN classifies 25 banks very weak • Muazu
advocates smaller banks
By Joseph Sesebo,
Sanya Adejokun,
Esan Sunday and
Godwin Egbara (Bauchi)
Several banks are
under investigation by the Central Bank of Nigeria (CBN) for round tripping and
illegal oil bunkering, CBN Governor Charles Soludo confirmed on Tuesday.
He made the
disclosure at the opening ceremony of a three-day seminar for finance correspondents
and business editors, organised by the bank in Bauchi, where it was also stated
that there are 25 “seriously weak” banks in the country
Insisting that
the scourge of round tripping is again rearing its head as a desperate way by
some banks to meet the re-capitalisation directive, he pledged that once the
investigation is concluded, punitive measures would be applied against those
culpable.
Sanctions may
include outright revocation of dealership licences.
Soludo gave the
assurance that banks that fail to recapitalise to N25 billion by the end of
2005 would be free to apply for a community banking licence.
The CBN suspended 21 banks from the
foreign exchange (forex) market in 2002 following discovery of their
involvement in round-tripping. They were suspended for a year and made to
refund the money made from the illicit transactions. A total $1.4 billion was
refunded by them.
Before the suspension of the 21 financial
house, which led to the removal of some chief executives and suspension of some
key staff, the apex bank had investigated about 70 banks said to be deeply
involved in the crime.
Soludo gave assurance that the banks said
to be involved in funding oil bunkering would be investigated and punished
accordingly because banks are to play by the rules.
Against the backdrop of the reforms in
the sector, Bauchi State Governor Ahmadu Adamu Muazu has appealed for the
existence of smaller banks whose market base might not reach the new
capitalisation, but still conduct commercial operations.
He made the appeal when Soludo led his
management team to pay him a courtesy call at Government House, Bauchi.
In his view, smaller banks should be
allowed to exist but under close supervision by the CBN, which would spur a
healthy competition between the mega and small banks.
Responding, Soludo expressed his optimism
that the reform in the banking sector would result in big banks that would
strengthen the economy, adding that commercial banks, due to low capital, could
not finance capital-intensive projects as investors look to foreign banks for
help.
Back at the seminar, he said commercial
banks, despite their branch networks, could not be said to be mega banks as
there are no big banks in the country.
He lamented that Nigerian banks formerly
ranked among the five largest in the world but that they are now not even among
the first one thousand.
Meanwhile, the CBN has put the number of
seriously weak banks at 25 as of September 2004.
They suffer from one or a combination of
the following: Insolvency, under-capitalisation, illiquidity and poor asset
quality.
According to the CBN, 13.84 percent of
the total deposit liabilities of the banking sector is under threat and 14.96
percent of its total assets is equally under threat.
These ratios have not crossed the
threshold for systemic distress as defined in the contingency planning
framework for banks, but there are genuine fears that the system is heading
towards distress, the CBN insisted. Its Director (Banking Supervision) Ignatius
Imala disclosed this at the seminar.
The top four banks, as of September,
controlled 32.30 percent of the aggregate assets of the industry, 32.57 percent
of aggregate deposits and 28.76 percent of the aggregate credits.
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