|
CBN�s marching order on N25billion banks� capitalisation: Ethnicity has no place in banks� merger�FCMB DMD
The Central Bank of Nigeria�s order on banks to increase their capital base to N25billion has continued to raise dust in the banking industry with various operators rolling out arguments and counter-arguments on the desirability of the new policy. Deputy Managing Director, First City Monument Bank, Mr. Ladi Balogun and Executive Director, Prudent Bank, Mr. Segun Oloketuyi appraise the new policy in separate interviews:
How did you receive the news of the recent hike in the capital base for banks in the country?
I need to say that the FCMB, as a responsible institution, has always recognized the need for the consolidation of the banking industry. Clearly, it would benefit both the customers and investors in banks. It did not come as a surprise to us. In fact, we were in the process of raising our capital base when this news came out. Maybe, the way and the timing of the announcement by the Central Bank of Nigeria were what probably surprised some people.
One of the fears expressed by critics of the new policy on capital base for banks is the tendency for banks to seek alliance along ethnic lines. For instance, Hallmark, Citizens and Diamond banks are reportedly planning a merger. What�s your view?
I don�t think the fear is justified. Naturally, what would happen is that you are likely to contend with soft and hard issues when it comes to the issue of consolidation. You look at those you share similar culture with as well as those you think by strategically coming together, it will add value to your business. And banks like Hallmark and Diamond are looking at the possibility of a merger; definitely, ethnicity may not be the main issue here. For the institutions to get along together fine, it is a very important factor.
In case a bank is unable to meet the deadline, what would be the fate of depositors in the event that such bank isliquidated?
That is one of the unfortunate misconceptions about the issue of the N25billion capitalization. My belief is that most institutions, if not all, apart from those already unsound and unhealthy, will ultimately come together. I don�t believe depositors have anything to fear simply because at the end of the day, when an institution has no any other option, it would seek consolidation.
And when that consolidation happens, the acquiring institution will cover its liabilities. It may be too early for one to begin to nurse that kind of fear. Most of the banks today are responsible institutions and if there is any opportunity to continue in the business either by merger or acquisition, I �m sure they would explore it. I don�t believe most of the banks would be liquidated, I don�t believe it would come to that.
Which of the options is FCMB adopting in this circumstance?
FCMB had taken decisions long before now to significantly increase its capital base. We have established a three-pronged approach. The first is to raise our capital base through private placements, followed by listing on the stock exchange. The second phase is the invitation of strategic investors into the business and the third phase is consolidation /merger. These plans have only been accelerated by the pronouncement, but certainly, there is no problem either in terms of our strategy or our vision.
Do you believe that the 18 month-grace period is adequate for banks to sort out themselves as far as this new legislation is concerned?
I believe it is, because one of the things we are looking at is: first, we have been in the business of capital raising, merger and acquisitions for the past 25 years, since the days of the Central Securities Limited. We have been raising capital for companies that have been coming to the stock market. So, we have experience in capital raising. We also have immense experience in mergers and acquisitions. In fact, FCMB was involved in major acquisitions in the capital market today. So, we have the expertise to do whatever we want to do within the time frame.
Some say most banking dynasties would lose out in this exercise. What happens to the legacies of the Baloguns of the Nigerian banking industry after the exercise?
FCMB is a very strong brand. This is beyond Balogun�s name. The bank is, arguably, one of the best in the capital market today. Investment banking is a very crucial aspect of banking. Our intention is not to lose the FCMB brand in the process of consolidation.
How timely is the move to withdraw public sector funds from banks at a period when most banks are still sorting themselves out in the area of new capital base?
What government has talked about is a phased withdrawal. I guess the question is how well the withdrawal would be phased. One of the unfortunate things is that the pronouncement came at the time it did. FCMB has not been a public sector bank, so the direct implication for us is almost none. The likely thing to happen is for the interest rate to go high because banks would begin to take money in anticipation of the withdrawal of the public sector funds. What the announcement has done is to create a degree of anticipation amongst those banks and customers who feel that their banks may be affected by the withdrawal of these funds. These customers may begin to ask questions.
In addition, some banks may be taking money to replace the public funds thereby driving interest rates upward. We should try not to create panic in the industry by making pronouncements that would lead to a sudden reaction.
People say the emerging bigger banks would not be disposed to lending to small investors, what�s your view?
The issue of N25billion has been going on for a long time now. The issue is whether this is a fait accompli or it is a recommendation, which means that we may be awaiting the final detail. I believe that it is essential that there is some classification. There is opportunity for banks to exist. Today, we have community banks and we have mortgage banks. There should be room for regional banks, and investment banks. My hope is that there would be some kind of provision for each bank and in these banks; small investors would be adequately catered for. Certainly, when it becomes very large, you cannot guarantee the same level of flexibility and speed when it comes to service delivery. I think that is one of the advantages, which smaller banks generally have. When you run an institution that has about 100 branches, your control must be tighter, and when it is so, the level of empowerment given to your branch manager would probably be reduced.
Sunday Punch, July 25, 2004
|
|
| |
Copyright 2003 - 2004
Punch (Nigeria) Limited. All Rights Reserved
Powered by dnetsystems.net
dnet�
|
|
|
|
