Investors and shareholders of troubled Savannah Bank and Societe Generale Bank who are still wondering when their banks would resume normal businesses following the recent restoration of their operational licenses by the Central Bank of Nigeria now have a glimmer of hope that their wait would not be long.
Speculations have been rife that the two banks, which became distressed and were forced to close shop following their inability to meet the apex bank’s recapitalization policy in 2003, may not make it back to business under the terms of the current banking sector reform.
But the Nigeria Deposit Insurance Corporation (NDIC) today reassured customers in the two banks that everything was being done by the monetary authorities to bring them back on their feet after almost a decade of closure.
NDIC Managing Director, Umaru Ibrahim, who gave the assurance at the two-day Workshop for Business Editors and Finance Correspondents at Dutse, Jigawa State, said ongoing discussions between the joint committee of the CBN and the owners of the banks would invariably help them recapitalize their operations to the level that would enable them open their doors to business sooner than later.
Mr Ibrahim took the opportunity to debunk reports that a deadline had been given the two banks to get fully recapitalized by the second quarter of 2012 or get their licenses revoked again, pointing out that no such directive had been issued by any known financial sector regulatory authority. According to the NDIC boss, with the level of the current discussions on resuscitating the two banks, there were signs of their resuming operations in the not-too-distant future.
He said, “The true position is that a few weeks ago I said in Lagos that we are still talking to both SGBN and Savannah Bank managements on a number of issues, and we are doing everything to help them open their doors for business in the interest of depositors, in the interest of the banking system and the interest of economy in general.
“I warned, however, that I cannot give a tentative or an actual date for achieving that, and on the case of second quarter, I was not too categorical about that. I mentioned that we have a joint committee of the CBN and these banks. So, we are discussing and we are making all efforts to make sure that they get credible investors who will invest, so that they can open their doors to business as soon as possible.”
In his own speech, the Corporation’s Legal Adviser, Alheri Bulus Nyako, said the ongoing intervention by the monetary authorities in the troubled banks was informed by the need to avert the likely negative systemic implications of the collapse of the affected banks on the entire industry.
Mr Nyako recalled the circumstances that led to the closure of Savannah Bank and SGBN, pointing out that the various steps taken to reposition the two banks and restore their operations after they went under were yielding dividend. He explained that the problem of the two banks derived from the previous reform exercise which, if analyzed within the context of the circumstances leading to their collapse, did not pose serious risk to the financial system.
Specifically, the legal adviser said even then, the owners of the banks had been given adequate time to recapitalize the entities but that indications showed that they had not been able to mobilize the required funds for the revitalization of their operations, hence the new moves by the authorities to re-consider their situations and what could be done to support them.
He further explained, “What happened to those banks are not quite the same with what happened in the case of the recently intervened banks.
“As regulatory authorities, the primary pre-occupation of CBN and NDIC is to ensure the safety of depositors funds by ensuring that all issues that tend to pose risk to the system are addressed through one intervention or other measures. We look at the systemic implications of such issues for the entire industry.
“On the issue of Savannah Bank and SGBN, the regulatory authorities have given the go ahead to the owners to recapitalize the banks. They were initially given 18 months, which they did not meet. The time was further extended, yet we don’t see any signs that they been able to mobilize the funds to get them back on their feet.
“Another issue is that their distress, at the time it occurred, did not pose any systemic risk to the industry.
“However, as the Managing Director had disclosed, the monetary authorities have set up a Committee to look into their case. There is a proposal on the table. But there is no way support could be offered to any bank if the owners have not shown signs of readiness for such support. The efforts must be seen that the owners are prepared and able to mobilize some funds forthe recapitalization process to succeed.”