December 14, 2011
“The golden age is before us, not behind us." - William Shakespeare
The decision by the Securities and Exchange Commission to grant approval to the application before it from Union Bank Plc is a welcome relief to a market that is in need of a closure to this episode.
We had written an analyst commentary on matters for clarification on the scheme of merger in a news post titled The New Union Bank Transaction – Matters Arising. Subsequently, the SEC had cause to raise procedural concerns on specific issues on the application (see SEC Rejects Union Bank’s N9.5b Offer Bid). The bank responded to both concerns to the satisfaction of the SEC.
Last week, the House Committee on capital markets issued an instruction (House requests SEC to suspend Union Bank Plc recapitalisation) requesting that the approval required to conclude the transaction be suspended.
The bank represented that it had complied with the provisions guiding the recapitalisation programme as defined by the Central Bank of Nigeria and the relevant aspects covered by the Securities and Exchange Commission. Our independent enquiries would indicate this to be so.
In granting approval to Union Bank to take steps that would see it fulfil the terms of its recapitalisation, the SEC has acted within its mandate and in furtherance of the public interest mandate. The HCCM must therefore see the slight inconvenience arising from the very public ‘suspension order’ as nothing more than an administrative issue.
This development brings to fore the growing concern over the role of such probes and public communication of administrative issues regarding ‘oversight’ on the banking reforms for listed banks. Today, we learnt that the Reps Committee Summons Ecobank, Oceanic Over Acquisition. This is a needless exercise.
Only recently, we had argued against such action in a position paper titled How to Restore Market Confidence in an era of Economic Uncertainty, that “the transactions for which the House seeks to hold a public enquiry is a matter for the CBN and SEC (regulators and public offices covered by the oversight responsibilities of the NASS) and not directly for the buyers (who have simply followed the laws of the land – as is). To ask them to come and explain a regulator approved matter in public is the clearest attempt at ridiculing the regulator – and by extension undermining the market confidence effort we are all working towards.”
For the avoidance of doubt, we do not advocate for a second, that the deal(s) are off limits to legislative oversight. That would be wrong and against the spirit of the constitution. Every citizen/institution must be entitled to an opportunity to use democratic means to understand, clarify and most importantly, resolve issues. The NASS is the body so authorised to do so and we are mindful of that.
At Proshare, we however see this development as the great opportunity to take head-on the lingering imbalance between the vision/objective of the house (NASS) and market regulators; and believe its is important for all stakeholders to get on board this vehicle of opportunity to engender a better market-regulator-legislature matrix.
This issue predates the current office holders and quite frankly, the approach is well worn and unproductive to all concerned. With a little bit of innovation from all parties, we can turn this around.
The house should, first, be interested in the issue to provide a balance between professional/regulatory perspectives and the much needed compromise required to address the concerns of the ‘excluded/losers’. This is a much needed insight/perspective often ignored in delivering a package that allows us to move on. Fact is that this impasse remains the driving force behind the inquest that is slowing us down from the ‘main/big’ picture.
Second, the house must come to terms that while it should not abandon its oversight responsibilities, it must advance legislation that promotes the interest of Nigeria(ns) like it is doing with the capital formation bill it seeks to promote which should be commended and supported by all.
Finally, it is imperative that all stakeholders recognise the enormity of the challenge facing our economy and financial services sector in 2012 and take steps to close ranks in solving them.
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