The CBN has justified the dissolution of the boards of FirstBank Nigeria Limited and FBN Holdings, saying the steps embarked upon since 2016 which ended up with the action were taken to stabilize First Bank of Nigeria Limited, its flagship and help it come out of its precarious financial condition in its 2016 financial crises.
This is coming just as financial analysts blame the board of the bank for deliberate untoward action and blatant insider related abuses.
Johnson Chukwu, managing director of Cowry Asset management Limited believes the situation which he regarded as unfortunate would have been prevented if more care and prompt action was taken as identified and directed by CBN.
Speaking on the Arisetv, The Morning Show on Friday and responding to the alleged grave condition of the systemic important bank to the economy with about 26 percent Non Performing Loans in 2016, the financial expert said the deteriorating condition of a Bank could be attributed to prevailing unfavourable operating enviroment, adherence or obedience or non of it to regulatory or supervisory recommendations or outcome and the role of major shareholders or stakeholders which could make or Mar any institution.
He did not see the Bank’s case as being exceptional as similar case had happened to the then First City Monument Bank, (FCMB), where its founder was unceremoniously removed. Although Godwin Emefiele, CBN Governor tried to assuage the investing public not to embark on panic withdrawal, Friday Ameh, energy analyst says FirstBank’s case may have jolted the industry as according to him, the bank used to be regarded as a major symbol of the economy, more so as the bank had produced some governors of CBN in the past.
“This shows that no matter your position either as an individual or corporate organization in the society, there is need for adherence to corporate governance principles and nobody or institution should play larger than life game.”
Justifying CBN’s action, Emefiele wondered why some of the board members refused to either take or drop some action even after appealing to them on some ocassions.
He said the action followed identification of the bank’s problems, which were attributed to bad credit decisions, significant and non-performing insider loans, poor corporate governance practices and the lack of capacity by shareholders of the bank and FBN Holding Plc to recapitalize the bank to minimum requirements.
Emefiele said that CBN stepped in to stabilize the bank in its quest to maintain financial stability, especially given FBN’s systemic importance.
He listed some of the regulatory action taken by the CBN to include: change of management team under the CBN’s supervision with the appointment of a new Managing Director/ Chief Executive Officer in January 2016.
Granting of the regulatory forbearances to enable the bank to work out its non-performing loans through provision for write off of at least N150b from its earning for four consecutive years.
Granting of concession to insider borrower to restructure their non-performing credit facilities under very stringent conditions and renewal of the forbearances on a yearly basis between 2016 and 2020 following thorough monitoring of progress towards exiting from the forbearance measures.
Emefiele pointed out that these measures had yielded the expected results as the financial condition of FBN improved progressively between 2016 when forbearance was initially granted to the current financial year.
However, he said that notwithstanding the significant improvement in the bank’s financial condition with the positive trajectory of financial soundness indicators, the insider related facilities remained problematic.
Emefiele cited insider abuse, insider credit and breakdown of corporate governance as the reason behind the sacking of the board of FBN Holdings, Nigeria’s largest bank.
The CBN governor further announced the reinstatement of Dr Sola Adeduntan as the Managing Director of the interim Board after he was removed by the now sacked board of First Bank Plc.
According to Emefiele, Adeduntan had displayed professionalism in handling issues since CBN had been relating with the bank, claiming that the action of the board in sacking him may be due to the fact that Adeduntan may have refused to yield to some of the dictates of the board.
