Bankers' Committee Cautions Against Hasty Mergers
The sub-committee on Monetary and Fiscal Policies, an arm of the Bankers' Committee, has cautioned banks against hasty and multiple mergers, saying it may cause "post-merger imbroglio."
The sub-committee, which is headed by the president of the Chartered Institute of Bankers of Nigeria (CIBN), Mr. Samuel Kolawole, gave this warning in a memo it presented at the 275th edition of the Bankers' Committee in Lagos last week.
Entitled "Developments in The Financial System" and dated October 26, 2004, the memo "expressed concern over the apparent impetuosity accompanying the current bank consolidation exercise especially as regards mergers and acquisitions discussions and signing of Memorandum of Understan-ding (MOU)."
Describing as unhealthy, a situation where a bank would simultaneously be involved with different groups for mergers, the sub-committee noted that this unwholesome development has implications for credibility.
"Every group appears to be targeting December 2004 for the signing of an MOU thus creating the impression that December 2004 is sacrosanct.
"While banks will naturally want to protect themselves against runs by making pronouncements to assure their customers that something is being done, they should understand that one year is still available to them after December 2004.
"There is therefore the need for banks to be careful with how they go about the consolidation exercise to ensure that mergers are formed on a solid base to prevent any post-merger imbroglio," the sub-committee advised.
Given this scenario, it advised banks "not to give the impression that they are being rushed while the authorities should continue talking to the press to douse the prevailing tension."
The Bankers' Committee which is chaired by the Governor of the Central Bank of Nigeria (CBN), Professor Charles Soludo, is an association of the chief executives of banks and selected financial institutions which meet bi-monthly to discuss the state of affairs in the industry.
Amalgamated Bank of Nigeria comprising of Allstates Trust Bank, Gulf Bank, Hallmark Bank, Lion Bank and Universal Trust Bank blazed the trail about three months ago, to emerge as the first bank to sign a Memorandum of Understan-ding (MOU) to formalize their merger.
The Intercontinental Group consisting of Intercontinental Bank Plc, Equity Bank of Nigeria Limited, Gateway Bank Plc and Global Bank Plc also signed theirs about a month and half ago.
Four other banks - First Atlantic Bank Plc, Assurance Bank Limited, Manny Bank Plc and Guardian Express Plc followed to form of a mega bank known as Astrabank Plc.
Next came Sterling Bank, which comprises a group of five banks namely Prudent Bank Plc, Magnum Trust Bank Plc, EIB International Bank Plc, NBM Bank and Trust Bank of Africa.
And just last Monday, Wema Bank Plc, Fountain Trust Bank and Lead Bank Plc signed an MOU to formalize their merger.
A couple of weeks ago, Guaranty Trust Bank Plc (GTB) also acquired Inland Bank Plc to become the first bank to make an acquisition since Soludo on July 6, 2004 directed all banks to increase their capital from N2 billion to N25 billion before end-December 2005.
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