|
New Page 15
Banks and mergers
SEQUEL
to the increase in the capital base of banks to N25 billion, by the Central Bank
of Nigeria (CBN), which jolted the financial sector early this year, there have
been a flurry of activities within the sector to meet this requirement even
before the deadline-December 2005.
Thus, the current consolidation exercise
by the banks has witnessed mergers and acquisition discussions. Some of these
have progressed to signing of Memorandum of Understanding (MoU). Understandably,
the present frenzied efforts by the banks is a way out of the harm’s way even
when the deadline by the CBN remains as of today, thirteen clear months away.
The reactions of the banks so far indeed authenticate the policy of the CBN to a
large extent. For one it indicates that the apex bank may have simply created
the impetus for a synergy which was long overdue in the banking system. The
banks also appreciate the urgent need that to shore up their capital base, they
should of necessity, come together. By actions and spirit so far, the banks have
succeeded to douse fears that the sector was in for imminent collapse.
Encouraging as these developments may be,
the bankers’ committee which is an association of chief executives of banks and
selected financial institutions has raised a flag for caution. The committee
which meets monthly to mull over the state of affairs in the sector, has had
cause to caution wisely about the pace of development triggered by the urge to
meet the CBN new policy on capital base. Specifically, the Bankers’
Sub-committee on Monetary and Fiscal Policies headed by the President of the
Chartered Institute of Bankers of Nigeria (CIBN) cautioned on a possible
post-merger blues if the current, frenetic pace of signing MoUs is not tempered
with well-reasoned judgement.
The worry expressed by the Bankers’
Committee, which we share, refers to such a situation where a bank could be
involved with different groups for mergers discussion without considering the
compatibility or otherwise of such partnership. In this regard, partnership in
such a key area as the banking industry where customer confidence is paramount,
should not be just a marriage of convenience, but a partnership well grounded on
trust and confidence. The advice by the Bankers’ committee should be taken with
all the seriousness it deserves. It is timely also. It is understandable in the
present circumstances that banks will move to safeguard themselves against runs
by making pronouncements to boost customers’ confidence as is the case
currently. The banks need to be reminded however that they have at least one
year of grace to meet the CBN demand. Wise counsel demands that banks should
exercise extreme caution on how they go about the current consolidation
exercise. Restraint, even in the face of uncertainty, is one sure way the
present wind of mergers blowing across the banking industry can be meaningful.
Our concern remains that if the banks
close their eyes to the totality of salient issues that may make their current
mergers and acquisitions more or less a marriage of strange bedfellows, the
unwholesome effect may result in the opposite of what the entire reform is
intended to achieve. The economy will be worse for this type of hasty marriages
and the banks will sadly, be their own private enemies. The apparent haste to
merge may therefore not be a very good development after all unless the parties
involved act deliberately and with all the needed facts.
All things considered, while we welcome
the current talks by banks to come together, bringing their comparative
advantage of synergies to bear on each other, there is need to tread softly in
order to stave off the possibility of strange bedfellows entering into marriage.
The outcome could turn out to be very disastrous.
It is therefore time for the banks to
pause and consider just how damaging it could be for the industry and the
economy if their current moves achieve results that are diametrically opposed to
the original objectives that gave rise to them. In all, the caution by the
Bankers’ committee is loaded with wise counsel which if properly adhered to,
will save the banks and the larger economy huge difficulties, but if ignored,
would surely engender major crisis ahead.
We share this timely warning by the
Bankers’ committee because beyond the unhealthy consequences which a hasty
merger or acquisiton deal may occasion, the stability or otherwise of any
nation’s economy depends largely on the capital state of the banks. Banks should
pulse and have a deep reflection on how they are going about the present bonding
to meet the capitalisation requirement. The first suitors are not always real or
best ones.
|
