CBN's Dissolution of Banks' Boards Unsettles Customers, Stakeholders
The Central Bank of Nigeria stirred a modest controversy when it announced on Wednesday, January 10, 2024, the dissolution of the boards and management of Polaris Bank, Union Bank and Keystone Bank.
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In less than a day, the CBN promptly appointed new executives to supervise the operations of these privately owned banks, ostensibly serving in this capacity until new boards and management structures were reconstituted.
The apex bank's recent action has injected uncertainty into the banking system, triggering concerns among customers and stakeholders.
An air of apprehension surrounds the fate of these banks and the security of customers' funds in the wake of the shake-up.
Source: UGC
Background to CBN's banks' boards shake-up
The dissolution of the boards and management of Polaris Bank, Union Bank, and Keystone Bank by the CBN was attributed to various factors, including corporate governance lapses, regulatory non-compliance, breach of licensing terms, and involvement in activities deemed a threat to financial stability.
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This decision is thought to be based on the findings of a forensic audit conducted under the leadership of Godwin Emefiele, the former governor of the CBN, by a special investigator appointed by President Bola Tinubu.
In his recommendations, the presidential investigator, Jim Obazee, proposed revoking the sale of the banks, citing non-compliance with due process.
While the investigation findings have not been officially disclosed, reports suggest that Obazee advised the federal government to assume control of the banks, enhance their strength, and subsequently facilitate their sale.
The removal of the boards and management of these three banks is reportedly part of the report's recommendation.
Implications of CBN's dissolution of banks' boards
The CBN's decision to dissolve the boards of banks marks a significant and potentially far-reaching development.
This strategic move by the CBN is aimed at tackling governance issues and bolstering the stability and efficiency of the banking sector.
Under the leadership of Yemi Cardoso, the CBN is expected to reassess the acquisition processes of these banks, seeking to clarify any discrepancies.
Notably, the dissolution impacts no less than 30 board chairpersons, managing directors, and directors across the affected banks, each having no fewer than ten board members.
Chinyere Nnamdi, a stockbroker at the Nigerian Exchange Limited, while speaking with Legit.ng on Friday, stated that the market is yet to be impacted by the CBN's action.
She said:
"I believe the action of the CBN is in the interest of both the shareholders and customers. I'm not sure what impact the dissolution of the boards of the banks would have on the market since the affected banks are not listed on the stock exchange."
Customers concerned about their funds
In an attempt to prevent panic withdrawals that are typical in situations like this, the apex bank assured the public, specifically customers of these three banks, of the security and safety of their monies.
Many customers seemed confused with the news as they suddenly became concerned not only for the fates of the banks but for the security of their monies.
A Keystone Bank customer, Kehinde Adetumonbi, who spoke with Legit.ng, said he has decided to watch how events unfold over the course of the week to determine his following line of action.
He said:
"I would be lying if I said these events do not give me cause to worry. This is sometimes the pattern of events that leads to banks crashing. However, I would continue to watch how the development progresses, and then I can decide if I have to withdraw my money or not."
Also speaking with Legit.ng, Uyime Akpan, a customer of Union Bank said that the news has raised doubts about the stability of the affected banks.
He said:
"Everyone is scared now. Regardless of what is going on at the top, we all want our money to be safe. Nigeria is already to hard enough for one to start dealing with inability to access one's money paradventure a negative outcome."
Akpan, however, called for clarity from the CBN and Union Bank on the current health status of the financial institution.
One of the affected banks, Keystone Bank, has reassured its customers of the uninterrupted and smooth operation of its services as new management takes over.
Experts express mixed reactions to CBN's sack of banks' boards
In the past week, the shake-up in the banking sector has set tongues wagging as investors and analysts continue to weigh in on the issue.
Speaking with Legit.ng, Ralph Uwa, managing partner at Strongman Ventures, a Lagos-based investment firm, said the CBN took the necessary steps to clean up a rot in the system.
He said:
"First, we must commend the CBN for taking the bold step to correct the inadequacies in the way these acquisitions were carried out.
"Numerous queries have surfaced regarding the acquisitions of Polaris and Keystone banks, prompting a hopeful anticipation that thorough investigations will unveil any potential infractions that may have transpired during the acquisition processes."
Speaking on the contrary, Uche Maduka, a Lagos-based investment banker, in an exclusive comment to Legit.ng, said that the recurring instances of banks' board dissolution could erode public confidence in the industry.
He said:
"In these critical times, a delicate and strategic handling of the situation is paramount, as any undue disruption or loss of confidence could be detrimental to the stability of our banking institutions."
It is therefore important for the CBN to ensure it is not going overboard with this decision as this a negative outcome could send a convey a misleading message that the monetary and financial system is undergoing challenges."
He, therefore, stressed the need to approach ongoing investigations into these banks with the utmost discretion.
All eyes on CBN, banks
As events unfold, Nigerians will expect the CBN to give more clarity on its actions to prevent being prone to opposing interpretations.
The CBN intervention is expected to lead to a restructuring of leadership, increased accountability and transparency, and reflect its commitment to maintaining a robust and well-governed financial system.
The success of this decision will depend on the CBN's follow-up measures to ensure that new boards are constituted with qualified individuals capable of steering the banks towards sustainable growth.
Tinubu's investigator uncovers 593 foreign accounts 'opened' by Emefiele
In related news, Legit.ng reported that Obazee had submitted incriminating reports against Godwin Emefiele, the former CBN governor.
The final report, titled 'Report of the Special Investigation on CBN and Related Entities (Chargeable Offences),' was submitted to the president.
The report revealed that Emefiele operated no fewer than 593 illegal bank accounts in the United Kingdom (UK), the United States (USA), and China.
It added that without authorisation, the ex-CBN governor deposited £543 482,213 in fixed deposits in UK banks alone.
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Source: Legit.ng
