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Experts commend CBN’s intervention in First Bank

…say apex bank’s action will keep other lenders on their toes

Financial experts and analysts across the country have hailed the Central Bank of Nigeria (CBNs) dissolution and reconstitution of the boards of FBN Holdings Plc. and First Bank of Nigeria Ltd, saying the apex bank’s intervention in the board tussle, which has wrecked the financial institution in recent days, will keep other lenders on their toes.

Reacting to the CBN’s intervention, which saw the apex bank reinstating Mr. Adesola Adeduntan as MD/ CEO of First Bank of Nigeria Ltd, a day after he had been ousted by the now dissolved board, an Economist and CEO, BIC Consultancy, Dr. Boniface Chizea, told Saturday Telegraph that he fully supported the CBN’s removal of the First Bank Directors for sacking Adeduntan without first informing it about the decision. He said: “Banking is a highly regulated industry. In my days as a banker, you could not open a new branch without getting CBN approval.

“It was wrong of them to have gone ahead to remove Adeduntan against the wishes of the CBN, especially since we now know that CBN has been giving forbearance to First Bank and that the bank has insider lending issues. “It is a shame that the board behaved in that manner given the calibre of persons on it.

“But it is a good thing it (dissolution) happened; there should be consequences for bad behaviour. “With the strong action, the CBN has taken against First Bank, other banks will be kept on their toes.” Also commenting on the issue, a Professor of Finance and Forensic Accounting, and visiting Professor of Forensics, Copper Stone University, Zambia, Professor Richard Mayungbe, said although he believes that the CBN should have intervened much earlier in First Bank, the apex bank’s action was better late than never. “Insider loans are the cause of the majority of bad debts in the banking industry. They were responsible for the collapse of the defunct Skye Bank. “First Bank is not a bank the country can toy with.

The CBN has been aware for several years that the bank was grappling with a lot of insider loans but it allowed the problem to linger. “From what we are hearing, one of the members of the board, took loans amounting to N75 billion. That is enough to set up three banks,” he stated. On whether the CBN had the authority to dissolve the bank’s board, Mayungbe said: “Of course, the CBN has such powers. “The fact that you are the biggest shareholder in a bank does not automatically mean that you must have a say on who is on the board.

“There are a lot of things the regulators will look at. If they believe that you will not be a stabilising factor, they will not give their approval.” Similarly, Managing Director /CEO of SD&D Capital Management Limited, Dr. Idakolo Gabriel Gbolade, said the CBN’s action did not come to him as a surprise. “There are indications that the action of the CBN on the board of First Bank Plc. and FBN holdco has been in the works for a while given the correspondence with the bank’s board as regards insider loans by the directors. “First bank is a very important player in the banking sector and any news of negative performance regarding the bank will affect the banking sector.

“The bank is one of the systemically important entities in the financial sector and reports like the shake-up of the board of the bank and holdco will negatively affect the entire banking sector,” he said. On what the CBN action portends for minority shareholders, he said: “The news has made the trading values of its shares to be on the downward trajectory and the minority shareholders will have serious erosion in their share value if the negative impact of this decision is not immediately addressed.”

He said he supported the CBN’s action, as according to him: “It serves as a warning to other banks that have allowed their directors to access unsecured loans, going against prudential guidelines that they would not be spared by the CBN if the anomaly is not regularised and they are eventually discovered by the regulatory authorities.” Also, a former Commissioner for finance in Imo State, Prof. Uche Uwaleke, threw his weight behind the apex bank’s decision. He said: “I support the CBN wielding the big stick on any bank that flouts the rules. A banking system regulator should be seen to take the issue of corporate governance very seriously.”

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