As CBN Hammers Union Bank, others
IRRESPECTIVE of a nation’s Gross Domestic Product, the health of her banks is a major determinant of the viability of her commerce, and the vulnerability of her people to sabotage tendencies. It was this realisation that led to the recapitalization of the banking sector and the subsequent reduction of the number of banks in Nigeria. However, over the years, the banks have become despotic and agents of corruption and underdevelopment. Therefore,THE HOPE is less amazed that the CBN, which is also cleaning its Augean stables, had thought it germane to suspend the executives of the Board and Managements of Union Bank, Keystone Bank, and Polaris Bank.
ACCORDING to the CBN, this action became necessary due to “the non-compliance of these banks and their respective boards with the provisions of Section 12(c), (f), (g), (h) of Banks and Other Financial Institutions Act, 2020”. The HOPE observes that Section 12 and the cited subsections implied that the banks would have failed to fulfill or comply with any condition subject to which the license was granted; were involved in a situation, circumstance, action or inaction which constitutes a threat to financial stability; failed to comply with any obligation imposed upon it by the Act, or the CBN Act or any other rule, regulation, guidelines or directive made under it and is of the opinion that the Bank is critically undercapitalized with a capital adequacy ratio below the prudential minimum or such other ratio as the Bank may prescribe. These infractions according to the Act are part of the conditions for the revocation of the licenses of the erring Banks.
However, since revocation is not the language of the CBN, it is better to assume that investigations are still on and the need to prevent panic amongst Nigerians is germane, and appropriate given the situation on ground.
HOWEVER, the CBN should have also informed the public that Section 49 which stipulates that “any person being a director, manager or officer of a bank who fails to take all reasonable steps to secure a compliance by the bank with the requirements of this Act, or the correctness of any statement submitted under the provisions of this Act, commits an offence, and is liable on conviction and in addition, the Governor may suspend or remove from office or blacklist any such officer, manager or director”, was being invoked on the perceived Boards of these banks.
DUE litigation and court processes are, however, expected to expose actual offenses and prescribe the appropriate punishments. This, THE HOPE counsels, should neither be delayed nor shrouded in secrecy.
WHILE the CBN “assures the public of the safety and security of depositors’ funds and remains resolute in fulfilling its mandate to uphold a safe, sound, and robust financial system in Nigeria”, we at THE HOPE observe from the outcomes of forensic audits, and recent directives on these banks that the Nigerian banking sector is no longer at ease. We observed and reiterated at different times in the past that inhuman treatments of Nigerians at banking halls, high interest rates on loans, low interest on savings, paucity of cash and indiscriminate deductions have reduced Nigerians faith in the banking sector. While we are poised to believe the CBN’s assertion that “our Banking system remains strong and resilient”, it is expedient that the nation’s monetary policy must be revisited in the context of current realities. Thus, customers’ complaints about unhealthy and unauthorized capital flights from their accounts as well as other vices should be checked, and corrected while victims are quickly compensated. This is germane, as the instability in the banking sector is hampering the trust of Nigerians and may contribute to the collapse of the industry except holistic measures are taken in time.
FURTHERMORE, Nigerian banks should remain committed to the roles of banks in economic development. The politicisation of the banking sector, release of ‘bailouts’ for political purposes and the protection of ‘VIP Debtors ‘who mostly do not return funds as against the refusal to loan small entrepreneurs who need fewer funds and can be made to honour debts, must be corrected.
THEREFORE , Banks should lend and recycle excess money within the financial system to create, distribute, and trade securities, rather than focusing on financial loans for the procurement of liabilities as the stock in trade is. The productive loans, as against consumer loans help to create money for the sustenance of the banks and nation in the long run.
THE recent practice of withholding money in order to procure a sharp increase in bank reserves or liquid would ultimately result into a “credit crunch” as it procures higher borrowing costs, promote gallop inflation, promote crime, inhibit the development of production oriented enterprises and thus negatively impact economic growth. For our banks to survive, this administration, must be ready to sweep the banking sector irrespective of whose ox is gored.