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Collateral: Experts profer remedies to non-performing assets

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Collateral: Experts profer remedies to non-performing assets

Apparently worried by high rate of non-performing collaterised risk assets at the disposal of banks, professional bodies under the auspices of the Chartered Institute of Bankers of Nigeria (CIBN) in collaboration with the Nigerian Institution of Estate Surveyors and Valuers (NIESV), are seeking the way forward. DAYO AYEYEMI reports

 

From five per cent of their total risk assets in 2015, the figure has risen to 15 per cent as at last October, three times above the Central Bank of Nigeria’s (CBN) stipulated rate. Not comfortable with this, banks are worried over towering non-performing collaterised assets in their portfolio, blaming some on inconsistent valuation reports.

 

The fear of huge risk and impact of valuation reports and way out of the woods topped agenda when both professional bankers and valuers engaged each other in Lagos last weekend. Chaired by the President, Mortgage Bankers Association of Nigeria (MBAN), Mr Adeniyi Akinlusi, experts at the forum sought the need to close ranks in order to nip in the bud incessant cases of non-performing risk assets.

Themed “Panacea to Collaterised Non-Performing Assets: Bankers and Valuers Perspectives,” the bankers were urged to realise that collateral was not a reason for lending, but a fallback.

 

Perspective

 

President, CIBN, Professor Segun Ajibola, expressed concerns over rising risk assets of banks above the Central Bank of Nigeria (CBN) stipulation, reiterating that banks relied on real estate profession to shield their portfolio against losses, aid profitability and efficient discharge of their duties.

 

During decision making processes, he said that estate surveyors and valuers should assist banks in valuing and reviewing real estate while also providing advisory services of suitability of collateral.

 

He stated that institutions and initiatives have been developed to strengthen the nation’s banking industry against nonperforming loans, stating that institutions such as the Assets Management Company of Nigeria (AMCON), in the aim of resolving non-performing loans assets, had recovered over N681billion worth of property, cash and shares in the past six years.

 

Guest Speaker at the forum, who is the Principal Partner, Akin Olawore and Company, Mr. Akin Olawore, an estate surveyor and valuer, defined valuation as a risk management tool. He explained that it was a tool to help banks in risk taking. According to him, valuation provides banks with useful guide for fallback position on loan in case of default.

 

He pointed out that valuation of surveyors was required as guide against banks’ non-performing collateral risk assets.

 

He stated that valuations had different concepts and for many purposes, noting that this had made it expedient for bankers to disclose purposes they required valuation reports for. “Don’t just go to a valuer and say give me just valuation. Banks should respect the view of the valuers in achieving common objective. Valuers are to protect bankers against risk collateral assets,” he advised.

 

The Lagos-based valuer listed over or under valuation, inability of banks to realise premium of some sales, wide disparity of figures by valuers, collusion and fraudulent practices, swap of valued properties, insufficient legal/due diligent and inaccurate data as areas of discordant tune between bankers and valuers.

 

To overcome these challenges, Olawore called for closer dialogue between valuers and bankers to really understand each other. Besides, he canvassed for data gathering and transparency in the process of valuation.

 

Another speaker, Managing Director, Datis Nigeria Limited, Mr Jide Ijimakinwa, noted that issues of non-performing collaterals were prevalent in most African countries, enjoining bankers to ensure that their customers met loan requirements to guard against cases of non-performing loans.

 

Another Lagos-based valuer, Mr Lanre Bolu, noted that valuations were time specific, stating that exercise carried out in 2015 would not be appropriate for 2018, hence the need for revaluation. Acting Managing Director, Heritage Bank, Mr Jude Monye, listed improper documentation, over invoicing, inconsistent valuation and deferrer letter as some fo the challenges of col- laterised risk assets challenges.

 

He stressed the need for insurance of loan and restructuring of loan among others. Head of Enterprise Risk Management, Trust Bond Mortgage Bank, Mr Tokunbo Aberuagba, said there was need to up the game of professionalism in order to reduce the risk emanating from collaterised assets.

 

Remedies

 

On panacea to loan recovery, Olawore urged the use of alternative dispute resolution especially mediation to achieve a mutually acceptable settlement option. He also suggested sale and lease back, modified public auction and sealed bid auction as panacea. Ijimakinwa urged banks to get the customers to pay through loan restructuring without having issue of strained relationship.

 

Besides, he called for the use of auctioneering in discharging assets before final sale to AMCON. The Datis boss urged bankers not to give offer letter out without valuation. Besides, he renewed call for effective legislation to strengthen the case of foreclosure. Bolu called for stronger foreclosure law in the country, while urging the need to simplify and reduce time for legal mortgages.

 

He bemoaned high interest rate on loans, saying this encouraged default. He therefore, called for the government’s intervention in lowering mortgage’s interest rates. The CIBN president canvassed the need to rejig professionalism among members of the two associations., adding that “there is need to engage young professionals coming behind; there is need to benchmark best practices.”

 

President of NIESV, Mr Joshual Patunola-Ajayi, said that collaboration between the two professions was for the whole nation, urging members to embrace professionalism in discharging their services. Last line The Federal Government must intervene to reduce high interest rate and cost of borrowing to mitigate the risk of nonperforming loans.

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