February 16, 2012
Boardroom squabbles and inconclusive merger and acquisition deals may be stalling the Central Bank of Nigeria’s (CBN) effort at evolving an efficient banking structure of either commercial, merchant or specialised and intended business justification approach to be adopted, come May 14, following the repeal of universal banking model, Business Day has learnt.
The plan, which the CBN insists must be fair to depositors and shareholders, and also receive the endorsement of the board, meant that the banks were supposed to drop the Approval-in principle (AIP) for the final licence. But Business Day investigations revealed that most banks, particularly those engaged in mergers and acquisitions, are not prepared for the final licence.
The implication is that effective May 14, 2012, no bank shall be allowed to retain a subsidiary that is not a CBN-approved offshore subsidiary; jointly owned with two or more banks, for money market activities; investment in SMEs; or a Custodian.
Also, the banks must, on or before May 14, 2012, ensure that their interests in real estate or immovable property not meant for banking purposes are disposed off, subject to CBN guidelines.
But the CBN insisted last night, that almost all the banks have complied, but agreed that the merger and acquisition deals may have hampered compliance by the banks involved.
“Most of the banks are well on track, infact two of them have completed everything and will be issued new licence soon, while three of them are grappling with merger and acquisition issues which may be sorted out before the deadline and one bank has been given extension to December 2012 because of the choice of holding company structure, “ Muhammed Abdullahi, CBN spokesman said.
Analysts said last night that the development might jeopardise the CBN’s programme of ensuring full compliance of all the banks with the type and nature of business by May 14, signalling the end of the universal banking era in the industry.
However, the CBN has stated in the circular that “Where a bank refuses, neglects, and/or fails (a) to submit a Compliance Plan within 90 days from 15th November, 2010 in accordance with Section 6 (1) above; and/or (b) to secure an approval - in-principle within 120 days from 15thNovember, 2010 in accordance with Section 6 (4), the CBN shall be entitled to vary the conditions of the licence of such bank to bring the licence in conformity with the provisions of this Regulation.”
It was gathered that while the boards that would have approved are not in place for those in merger deals, intrigue, bordering on pecuniary interest of some board members, particularly as it relates to retention or otherwise, of the subsidiaries considered by some as strategic to the banks, are believed to constitute obstacles to early adoption of the banking business structure.
While the rescued banks have commenced reconciliatory moves to douse the tension and organise meetings for the adoption of their plans, the other banks have also intensified efforts to pacify their aggrieved members by promising them compensation in form of appointments to the boards of their off-shore subsidiaries, among others.
The CBN had through a circular: “Regulation on the Scope of Banking Activities & Ancillary Matters, N0. 3”, released last November, directed that “(1) not later than 90 days from 15th November 2010, every bank currently operating under a Universal Banking Licence shall submit for the approval of the CBN, a Compliance Plan duly approved by the bank’s board of directors.
“The Compliance Plan shall contain such information as the CBN may prescribe from time to time, including: (a) the type of banking licence that such bank proposes to operate pursuant to Section 4; and (b) a detailed proposal on how the bank intends to comply with the provisions of this Regulation, and business justification for the approach proposed;
The CBN in reviewing the Compliance Plan shall consider the fairness of the proposal to all stakeholders, particularly, the depositors and shareholders, and may request for such additional information, documents, and reports, as it may consider necessary. (4) Where the CBN considers the Compliance Plan satisfactory, the CBN shall grant such bank an approval-in-principle, pursuant to which the applicant bank shall forthwith commence the restructuring of its operations and affairs for the purposes of bringing same in conformity with the provisions of this Regulation and the Compliance Plan.