The Nigeria Deposit Insurance Corporation (NDIC) advised the general public to disregard a misleading report by the Daily Trust Newspaper that the liquidation of the Fortis Micro-Finance Bank (MFB) was a hasty process.
The corporation gave the advice in a statement signed by Mr Mohammed Ibrahim, its Head of Communications and Public Affairs Department on Thursday.
It said that the corporation would always be faithful and alive to its responsibilities in protecting Nigerian Depositors at all times.
“The attention of the Nigeria Deposit Insurance Corporation (NDIC) has been drawn to a report in the Daily Trust Newspaper of Friday, Feb. 8, 2019 which alleged a hasty liquidation of Fortis Micro-Finance Bank (MFB).
“The report relied on statements credited to one Mallam Garba Kurfi, Managing Director of APT Securities and Fund to the effect that the CBN and NDIC should have managed the affairs of Fortis MFB rather than embark on its outright liquidation.
“He added that managing affairs of the bank, its resale or the appointment of a new management would have been better for its depositors and other banks that had business relationship with Fortis as well as the economy at large.
“The report also quoted Mr Boniface Okezie, National Coordinator of Progressive Shareholders Association of Nigeria (PSAN), as expressing the view that instead of regulators aggravating the problems in the financial industry through liquidation, they should devise other means of solving them.
“He also alleged that Nigerian shareholders, in general, were ultimate victims of the liquidation of banks without any hope of compensation,” the statement said.
The corporation said ordinarily, the NDIC would have ignored the two erroneous claims, but needed to correct the wrong impression which might be created in the minds of the public.
According to the NDIC, it is pertinent to state that both allegations are false and misleading in every material particular.
The corporation said: “Operators in the banking system are aware that the liquidation of ailing banks is always the last option adopted by the NDIC after other cost-effective resolution options have failed.
“In all instances, the safety of depositors’ funds is the primary concern of the corporation.
“Depositors of banks always come first in the order of settlement of claims in the liquidation process and on the other hand, the shareholders of failed banks are always the last to be paid after the settlement of their depositors and creditors.
“It is, however, common knowledge that shareholders are part of the governance structure of the affected banks through the control they exercise over the board and management of their banks during the annual general meetings and extra ordinary general meetings, as well as through appointment of directors and auditors of their banks.
“Accordingly, they cannot be absolved from the misdeeds of their boards.”
The News Agency of Nigeria (NAN) recalls that Fortis MFB was licensed by the Central Bank of Nigeria (CBN) in 2007 and listed on the Nigerian Stock Exchange (NSE).
However, in 2016, the shares of the bank was suspended due to failure to submit its 2016 audited accounts.
The corporation said that the various examinations and supervisory interventions of CBN and NDIC revealed that the bank was being run in an unsafe and unsound manner.
This, corporation said, led to huge non-performing loans, high cost of funds which included foreign and domestic borrowings as well as fixed term deposits.
Others, it said, included exorbitant administrative and personnel costs, especially high emoluments to successive chief executive officers and poor corporate governance practices, all of which impacted negatively on its financial condition.
“As a consequence, the bank was illiquid, could not honour its obligations to its depositors and became insolvent.
“The unhealthy condition of the bank degenerated to the extent that the CBN removed the management of Fortis MFB Plc in February 2018 and appointed a four-person Interim Management Committee (IMC) to take over the control and management of the bank.
“The IMC, which comprised of officers drawn from the CBN and NDIC as well as an independent Chairman, were mandated to steer the bank back to sustainability.
“The IMC managed the affairs of Fortis MFB Plc for a period of 10 months during which it did all it could to resuscitate the bank and began reimbursing depositors, using funds advanced by CBN for that purpose.
“The above is contrary to the claim by Malam Garba Kurfi that the CBN/NDIC made no prior attempt to salvage the ailing bank before its eventual liquidation.
“Unfortunately, due to the mismanagement of the bank by its erstwhile board and management, it could not be salvaged, hence its eventual liquidation,” it said.
