Experts question CBN sack of bank boards, management

Analysts are casting doubts on the sincerity of the Central Bank of Ni­geria (CBN) in the dissolution of the board and management of Union Bank, Keystone Bank, and Polaris Bank.

Those who spoke to our correspondents at the weekend queried how the CBN could replace the board and management of these affected banks with just two individuals per bank, reports Daily Independent.

This is coming as the CBN has vowed to deal with infraction prone banks in the last ten years.

Investigation revealed that the decision of the CBN, last week, when the board and management of three banks in the country were removed and replaced was the first in­stalment of such an exercise.

The CBN had last week dissolved the boards and man­agement of Union, Polaris, Keystone and Titan Trust Bank, citing non-compliance with the Banks and Other Fi­nancial Institutions Act, 2020.

The apex bank appointed executives to oversee the oper­ations of the banks.

CBN’s Acting Director of Corporate Communications, Mrs. Hakama Sidi-Ali, an­nounced the appointments – Union Bank: Managing Di­rector, Yetunde Oni; Executive Director, Mannir Ringim. Key­stone Bank: Managing Direc­tor, Hassan Imam; Executive Director, Chioma Mangn. Po­laris Bank: Managing Director, Lawal Akintola, Executive Di­rector, Chris Onyeka Ofikulu.

The CBN stated that the ap­pointments took effect immedi­ately, emphasising its commit­ment to immediate action and minimising disruption.

According to the apex bank, the move to reinstate lead­ership in the affected banks demonstrates the CBN’s pri­oritisation of maintaining confidence and stability in the financial system.

A source close to the apex bank, informed that several deals hitherto completed may be revised for possible action.

“The CBN and the banking sector will be busy in this first quarter. At least, two banks will see management and board changes”, our source said.

When probed further, the source refused to mention the two banks.

“It will be premature and a breach of confidence to name the banks at this time but the two banks are struggling Tier2 banks”.

BOFIA 2020 under siege

In announcing the sack­ing of the board, Hakama stated that the action became necessary due to the banks’ non-compliance with provi­sions of Section 12(c), (f), (g), (h) of the Banking and Other Financial Institutions Act, (BOFIA, 2020).

Hakama noted that the banks’ infractions varied from regulatory non-compliance, corporate governance failure, disregarding the conditions under which their licenses were granted, and involvement in activities that pose a threat to financial stability, among others.

Curiously, Section 12 c, f, g, and h cited by the CBN states that: “Notwithstanding the provisions of this Act or any other law, the governor may, with the approval of the board and by notice published in the Federal Government gazette, or print and electronic media, revoke any licence granted under this Act if a bank – (c) fails to fulfill or comply with any condition subject to which the licence was granted; (f) is involved in a situation, cir­cumstance, action, or inaction which constitutes a threat to financial stability; (g) fails to comply with any obligation imposed upon it by or under this Act, the Central Bank of Nigeria Act, or any other rule, regulation, guideline or direc­tive made hereunder; (h) is, in the opinion of the bank criti­cally undercapitalised with a capital adequacy ratio below the prudential minimum or such other ratio as the bank may prescribe.”

Section 12 and its sub-sec­tions cited have to do with the withdrawal of the licence of a bank, which explicitly states that the approval of the board of the CBN would be required. The CBN board which has not been constituted is distinct from its board of governors.

Therefore, did the Yemi Car­doso-led CBN get the required approval for their action as stated in the Section of BOFIA cited by the central bank?

Even though the Commit­tee of Governors are also mem­bers of the board, does BOFIA empower just the CBN gover­nor and his deputy governors to take such an action without other board members?

On the insincerity of the whole process, Stephen Iloba, a Lagos-based analyst, said the decision to appoint a CEO and an executive director each to take charge of the affected bank is against the Compa­ny and Allied Matters Act (CAMA) of 2020 as amended and the Banking and Other Financial Institutions Act (BOFIA).

He said, “It is out of place to appoint one executive director in place of about six or even eight executive directors and non-executive directors.

“The CBN needs some ex­planations to do to convince Nigerians that it is not going to be business as usual”.

Dr. James Newton, an econ­omist, said the CBN needs to speak out to protect the integ­rity of the bank and not be accused of witch-hunting the former governor of the bank, Godwin Emefiele, and Presi­dent Muhammadu Buhari.

He said, “In some quarters, the decision of the CBN is seen as a witch hunt. Mr. Cardoso should provide detailed ex­planations beyond what the director of corporate commu­nications did.

“Many are saying it is a way to get at former President Muhammadu Buhari and the embattled Godwin Emefiele”.