Access, Diamond Deal May Trigger More Mergers in Financial Sector

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Goddy Egene
There are strong indications that the proposed merger between Access Bank Plc and Diamond Bank Plc may lead to more business combinations in the banking and insurance sectors.

After weeks of speculations, Access Bank Plc and Diamond Bank Plc on Monday confirmed their plan to merge their operations.
Prior to the disclosure of the merger plans, Diamond Bank Plc had been having a bad patch, posting weak financial performance. Hence, some market operators said the decision to merge with Access Bank Plc would finally rescue Diamond Bank Plc.

The proposed merger has received an endorsement from the Central Bank of Nigeria (CBN), which said it had no objection to the planned business combination.

The apex bank in a letter dated December 17, 2018, addressed to the Managing Director/CEO of Access Bank and signed by Director of Banking Supervision, Mr. Ahmad Abdullahi, said it had no objection to the proposal, advising the commercial bank to proceed to obtain other necessary regulatory approvals for the merger.

The CBN, in an apparent response to an application for pre-merger by Access Bank stated, “We refer to your letter dated December 17, 2018 on the above subject (application for pre-merger) and write to inform you that the Central Bank of Nigeria has no objection to your proposed merger with the Diamond Bank Plc.

“Furthermore, you are required to obtain other necessary regulatory approvals for the merger.”
More boosts came from the stock market that reacted positively to the planned business combination as the share prices of both banks surged at the close of trading yesterday.

However, THISDAY checks showed that more banks and insurance companies might follow the route of Diamond Bank Plc in the very near future.

A senior stockbroker told THISDAY on Monday that there are some banks and insurance firms that have been going through challenges similar to that of Diamond Bank Plc.
“The arrangement between Access Bank Plc and Diamond Bank Plc will encourage more financial institutions to discuss similar strategy and combine their businesses.

There are some financial institutions going through strains but are not having the courage to come out. Now that Diamond Bank Plc has decided to bell the cat, we are likely going to witness more of such development in the financial sector,” the broker said.
According to him, Unity Bank Plc, which had been shopping for investors to strengthen its capital, may see also some offers within the country, following the news of Access Bank and Diamond Bank deal.

“You know Unity Bank Plc has a very strong penetration in the northern part of the country and any bank that is not very strong there can take advantage to combine its business with Unity Bank. As you know the bank is in dire need of capital injection,” he said.
The Managing Director/CEO of Unity Bank Plc, Mrs. Tomi Somefun had said the bank would soon finalise a memorandum of understanding (MoU) that would lead to the anticipated capital injection in the commercial bank.

“All I can say is that one of the parties is the second largest infrastructure finance institution in Asia. Even though we have closed the process, some of the parties we had engaged before are saying they want to invest, because the bank is now looking good.
“Two years ago, we were the one chasing these investors. But we have told them to wait until we close this deal and any other party that wants to join, we can talk under different arrangement.”

According to her, due diligence had been done on the prospective investors.
“What is still left is procedural or finalising that engagement. And because the Central Bank of Nigeria has seen what we are doing and they appreciate the efforts we are making and we have been carrying them along,” she said.

Meanwhile, the market operator said the insurance sector will also witness business combinations, saying that save for the cancellation of the tier-based recapitalisation by the National Insurance Commission (NAICOM), there would have been announcements of some mergers and acquisitions among the underwriters.

“The saving grace is the cancellation of the recapitalisation exercise by the regulator. But that notwithstanding, firms that are very serious and want to remain strong forces in the sector will not wait for NAICOM to come up with another recapitalisation announcement before they strengthen their share capital and one of the ways that will happen will be through mergers and acquisitions,” the operator said.

Report Highlights Risks in Digital Tax Collection Tools

A report by the Association of Chartered Certified Accountants (ACCA) has urged tax administrators to manage the risk of imposing restrictive technological requirements on taxpayers.

The latest report by the professional body noted that tax administrations have always looked to the latest technological development to assist in the task of effectively collecting taxes from the population.
It pointed out that the current shift in the digitalisation of the global economy was an opportunity presented to national tax collectors to make a change in the efficiency of their processes.

“Just as the digital tools can benefit tax administrations, the development and implementation of technological innovation in the private sector is a constant race to improve performance.

“At the extreme regulatory constraints could deprive businesses of the opportunity to exploit the most economically efficient technology, stifling competition and even growth.
“Tax authorities face the additional burden that their systems must work for every taxpayer in a stable and predictable fashion. As a matter of sheer practicality, tax systems cannot evolve constantly as businesses do.
“A single central authority will implement a single central system, which must balance the needs of every taxpayer and will by its nature change infrequently in discrete steps,” the report stated.

ACCA’s Head of Business and Tax Law, Jason Piper, while commenting on the report, stated businesses operate independently, adding that each would tailor its digital tools to match its own circumstances.
“The constant cycle of technological change means no two businesses will implement identical solutions. Tax authorities may see a benefit in imposing a standardised system which drags the least innovative business into the digital net.
“However, there is a risk that enforcing these changes will in some cases do more harm than good if they compromise other businesses’ ability to explore all benefits offered by digital tools.”

Piper said further: “While most businesses have some level of technological awareness and use technology to an extent, many are by no means fully exploiting the potential benefits of these new tools. There are huge differences around the globe, with some economies “leapfrogging” ahead to mobile communications technology, completely bypassing the fixed infrastructure relied upon in more mature economies.

“Many programmes of tax automation and digitalisation are based on evidence that the population as a whole “use technology”. However, this may not map across to businesses. Even where the owners have bought a computer or smartphone, if a business does not have integrated systems or the national legal or commercial environment has yet to evolve, there will be a limit to the efficiencies tax administrations can exploit.”

The ACCA is a global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.