Consolidation: Merging banks to surrender licences, says CBN
By Bukky Olajide, Finance Reporter
MERGING banks in the country, under the current dispensation may lose their licences and be issued new ones to reflect the new consolidated outfit.
This development is coming ahead of the guidelines expected to be issued by the Central Bank of Nigeria (CBN) this month in respect of consolidation through mergers and acquisition.
Specifically, the Deputy Governor, Financial Sector Surveillance of the CBN, Mr. Tunde Lemo, explained that "consolidation of banking institutions only has to be through mergers or acquisition and not through group alliance or arrangement. If two or three banks come together to merge, it means they have to surrender all their banking licences and would be issued one new licence."
Lemo, at the sixth yearly seminar for finance correspondents and business editors in Bauchi, Bauchi State organised by the CBN, also said consolidation holds the ace in moving the fortunes of Nigeria's banking industry forward.
Listing the merits of consolidation, he said that the demand for offshore funds by Nigerian banks would greatly reduce with the on-going reforms in the sector.
The deputy governor noted that Nigerian banks currently lack capacity to finance huge projects in the energy sector, as majority of them go after Afreximbank, United States Exim Bank and others to finance projects in the country.
He explained that the development informed the CBN's initiative on bank reforms to make the financial institutions stronger and capable to undertake huge capital investment in the country. "There are enough grade assets for the banks to invest in after the mergers and acquisition particularly in the small and medium enterprises sector and energy sector," he said.
Besides, the apex bank will soon streamline the reform agenda under the current consolidation scheme under a procedural guidelines for mergers and acquisition.
The Deputy Director of the Research Department of CBN, Mr. James Olekah, said in Lagos that these guidelines would guard against farce mergers, as it will provide good background and information for the on-going mergers and acquisition that most banks had embarked upon in their respective consolidation exercises.
According to Olekah, the document would among other things, guide the banks about the financial institutions either merging or acquiring using relevant stipulated factors.
Olekah warned banks to watch their steps while consummating the consolidation programme to avoid avoidable crises.
According to him, the apex bank is coming up with some procedural guidelines before the end of the year as regards mergers and acquisition.
He said: "We realise that there is need for banks to have a common ground before they can now proceed on which banks to acquire or merge with." Olekah, however, stressed the need for merging banks to slow down the current pace of merger processes.
In line with the consolidation scheme, four Memoranda of Understanding (MoU) have being signed by banks willing to merge, while only one bank signified its intention to acquire another.
First Consolidation Bank (FCB) was the first merger arrangement. It is made up of Lion Bank Plc, Hallmark Bank Plc, and Gulf Bank of Nigeria Plc, Allstates Trust Bank Plc and Universal Trust Bank.
Intercontinental group is another merger made up of Intercontinental Bank Plc, Equity Bank, Gatewaybank and Global Bank.
Four banks namely, First Atlantic Bank, Guardian Express Bank, Manny Bank and Assurance Bank on October 11 signed MoU to be known as Astral Bank Plc while Guaranty Trust Bank on October 14 signed an agreement to acquire Inland Bank.
Also five other banks - Prudent Bank, Magnum Bank, EIB International Bank, NBM Bank and Trust Bank signed an MoU to merge and be known as Sterling Bank.
Most recent merger arrangement was between Wema Bank Plc, Fountain Trust Bank Plc and Lead Bank.
