Afribank, Spring Bank, Bank PHB Nationalised

06 Aug 2011

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Sanusi Lamido, CBN Governor

By Obinna Chima

Old                            New
• Afribank                 • MainStreet Bank
• Bank PHB             • Keystone Bank
• Spring Bank         • Enterprise Bank

The Central Bank of Nigeria Friday withdrew the banking licenses of Afribank Plc, Spring Bank Plc and Bank PHB Plc because "the three rescued banks have not shown the necessary capacity and ability to beat the September 30 recapitalisation deadline."
The Nigerian Deposit Insurance Corporation (NDIC) has swiftly stepped in, creating three bridge banks (temporary banks) to acquire the assets of the banks so as to continue operations on a fresh note.

Bridge banks are temporary banks set by a regulator to administer the deposits and liabilities of a failed bank.
Enterprise Bank Limited, Keystone Bank Limited and Mainstreet Bank Limited are the bridge banks established to acquire all assets and liabilities of Spring Bank, Bank PHB and Afribank, respectively. The CBN said it had issued banking licenses to the three new banks.

Both the CBN and NDIC assured depositors of the three banks that they have no cause to panic, as their deposits are safe.
Managing Director and Chief Executive Officer, NDIC, Mr. Umaru Ibrahim, who briefed the media in Lagos Friday on this latest development, said the new banks would become operational from Monday.

A statement from the apex bank expressed support for the decision by the NDIC to adopt the "Bridge Bank Mechanism."
The NDIC boss said  the decision to create the three bridge banks was in line with the NDIC Act. According to Ibrahim, the corporation consulted with the CBN and Federal Ministry of Finance, before establishing the bridge banks.

The NDIC also said  the assets and liabilities of the aforementioned financial institutions have been taken over by the bridge bank.
The NDIC boss disclosed that Equitorial Trust Bank Limited (ETB), one of the rescued banks, was currently in the final stage of its negotiation with a prospective investor, adding that there were strong likelihood that the bank will meet the September 30 deadline.
Ibrahim said: "MainStreet Bank Limited has assumed the assets and liabilities of Afribank, while Keystone Bank Limited has assumed the assets and liabilities of Bank PHB. Enterprise Bank Limited has assumed the assets and liabilities of Spring Bank."
He said that the three bridge banks are local banks. 

With this arrangement, Ibrahim said a fresh management would be appointed to manage the banks from Monday.
Commenting on the move by Fidelity Bank Plc to acquire Afribank Plc, he said that the "Board of Afribank decided that they will not go along with Fidelity."

The NDIC boss stressed that the corporation was encouraged by the provision of the bridge bank option in the law governing the country, to resolve the problems in the banking industry.
Ibrahim insisted that the  bridge bank option was adopted to prevent the liquidation of the banks, which he pointed out, may have dire consequence on depositors and may also undermine public confidence in the banking system.

He added: "The essence of establishing a bridge bank is to provide for continuity, essentially in banking service and to protect depositors. It is an arrangement with ensures that no depositor losses his money. By Monday, if you are a depositor in any of these banks, you can knock at the door and get your money and it will continue like that, unlike in a situation where you liquidate the banks.
"In the past, we have seen depositors die once a bank is liquidated. But here, you (depositors) have an umbrella that provides you with total protection, until when we are able to get investors to recapitalise these banks."

Ibrahim said further: "The Bridge Bank option is a veritable tool for enhancing depositors’ operations and promoting confidence by ensuring seamless continuity of banking operations. The NDIC will operate the Bridge Banks until such a time that we engage the Asset Management Corporation of Nigeria (AMCON) with a view to capitalising the Bridge Banks.

"AMCON is expected to open up negotiation with investors who may be interested in capitalising the Bridge Banks. With this action, a resolution of the crisis in the Nigerian banking system is assured, as it brings certainty and stability to the banking system. It worthy of note, that unlike other parts of the world where depositors lost funds in the resolution of banking crisis, no depositor lost any fund in this reform process in Nigeria."

Director, Assets Mana-gement, NDIC, Mr Adeleke Adedayo, explained further, saying that from Monday, "there will be no bank in Nigeria operating as Afribank, Spring Bank and Bank PHB. The three banks that we have created are the banks that have acquired the assets and liabilities of the banks. If you have money with any of these banks, if you want to use your ATM or from the banking hall, you can go there and withdraw you money."

The CBN and NDIC had in 2009, carried out a special examination of all the 24 banks in the country. Then, 10 banks were adjudged to be in a grave state as they were deficient in capital adequacy.
Afterwards, two of the affected banks – Wema Bank Plc and Unity Bank successfully recapitalised.
The CBN which fixed a September 30 deadline for the recapitalisation of the remaining had earlier threatened to liquidate any bank that fails to beat the deadline. It however soft pedalled, and threatened to nationalise the banks that fail to meet the deadline.
Union Bank Plc, Intercontinental Bank Plc, FinBank Plc and Oceanic Bank International Plc have all reached advanced stages in their respective recapitalisation process.

The three banks spent most of last night sending re-assuring text messages to their customers. One of such messages from BankPHB reads: “Dear customers, effective 08-08-2011, BankPHB Plc becomes Keystone Bank Ltd (KBL). KBL will continue the operations of the bank. Customers’ deposits remain safe and protected.”

Reacting to the development, National Co-ordinator, Independent Shareholders Association of Nigeria, Sunny Nwosu, said the revocation of the operating licenses of three commercial banks was "a calculated subversion of the three nation’s economy and the great people of Nigeria." He urged President Goodluck Jonathan to intervene in the crisis in order to avert negative global response.
He said: "That the CBN resolution of recapitalisation through bridge banks remains an attestation of failure or inept leadership by the current management of the apex bank toward finding a permanent answer to the nation’s induced banking problems. ISAN categorically state that the revocation of the operating licenses of the banks will further deepen the crisis of confidence in the domestic financial sector.

On his part, the Managing Director and Chief Executive Officer, Cowry Assets Management Company Limited, Johnson Chukwu, said the action by the regulators was too pre-emptive.

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  • I am in full support of the take over of the three banks. With inept leadership and selfishness, the board, management and shareholders of these three banks failed to agree on core investors. Well done Sanusi and your colleagues in NDIC and Finance Ministry.

    From: Akin Olojo

    Posted: 4 years ago

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  • If this will solve the problem,it is welcome development,but please what happen to the staff members.

    From: Macabeli,emoten

    Posted: 4 years ago

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  • This is a new dimension to handling of financial crisis resolution in the face of debt crisis ravaging a lot of European countries and weak American economy Nigeria's major trade partner.

    From: Ibrahim Abba Jauro

    Posted: 4 years ago

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  • But i hope our money is in safe hands because we don't want problems so many nigeria will not die of heart attack.

    From: Lovelyn enuoyibo

    Posted: 4 years ago

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  • This Sanusi man is hell bent on completely collapsing the Nigerian economy. This garrulous CBN Gov used public fund running into hundreds of billions of Naira to rescue these banks. Appointed Managers for the banks, frustrated legitimate investors who wanted to capitalise the banks. This is the longest recapitalisation process in the whole wide world. This is the time for President and the National Assembly to reign in this man. Enough of treating him with kid gloves because he is gifted with the garbs.He is simply a disaster to the Nigerian economy.

    From: Arnold

    Posted: 4 years ago

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  • This is very disturbing coming from CBN,these 3 banks still have 7 weeks to get their bearing before any action is taken against them.This is too PRE EMPTIVE of CBN and can/will cause a run on the bridge banks.Is it only the CBN gov taking decisions ? ,are all the other deputy govs gagged?It is time the national assembly & the presidency take a decisive action on CBN & its gov.This action has global implications

    From: Kunle

    Posted: 4 years ago

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  • I am more confused, what is in name changing; to me it look like mere name changing. Mallam Sanusi are you on top of this game at. You appear to be leaving some of your adept supporters more confused now. What is your game plan pls?

    From: Dele Adigun

    Posted: 4 years ago

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    Posted: 4 years ago

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  • Any leader who can not talk the talk or walk the walk or put his money where his or her mouth is is not fit to rule. That leader should fail and deserves to fail. A right thinking, focused, bold and courageous should be encouraged not condemned. Sanusi you are leading from the front and you are doing a very great job, for our country Nigeria and mankind. Sanusi please keep it up and The Almighty God will continue to guide you, your family, your team and every other public officer like you. Sanusi you are a great gift, a great pride to our country Nigeria

    From: Patrick Abobu

    Posted: 4 years ago

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  • If the management set up by Sanusi failed, then he should take responsibility and resign also because its as good as he has failed . Sanusi has nothing more to contribute to Nigerian economy

    From: Ayke

    Posted: 4 years ago

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  • I think the CBN leadership lack focus and is being led by a 'volcanic' boss. See, the issue here is nothing new but a renewed continuation of the past. The new bridge manager for sure would probably bring their own team, buy new executive cars and the likes and parade themselves with cover up deals. This is nothing but a display of confused leadership and now we are talking of NDIC to continue what the other CBN bridge managers failed to do. These banks should be liquidated if found to be insolvent so that the issue of recapitalisation can be closed.

    From: Adio

    Posted: 4 years ago

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  • Thank God for cbn to feel the customers feelings about their deposited cash in those banks.Sanusi,pls, contiue your good work towards nigerians no matter we are not grateful but God is with you,

    From: chief Iromuanya Eze

    Posted: 4 years ago

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