July 19, 2011 by Obinna Chima
The Central Bank of Nigeria (CBN) Monday shed more light on the failed attempt by Vine Capital Partners (VCP) to acquire one of the rescued banks- Afribank Plc, saying that the latter did not meet the requirements of the apex bank.
Deputy Governor, Financial System Stability, CBN, Dr. Chiedu K. Moghalu, dropped this during a chat with newsmen at the sideline of a media briefing in Lagos.
The board of directors of Afribank Plc had signed a Memorandum of Understanding (MoU) with a Vine Capital Partners Limited early this year. Vine Capital Partners is an emerging markets private equity firm with an interest in banking and financial services.
But Moghalu disclosed that the Committee of Governors shut down the deal based on evidences that were gathered by the banking watchdog.
“It is the board of directors that brings the MoU directly to the CBN for approval and when the board of Afribank brought the MoU to CBN, based on the evidence before us, the MoU did not meet our requirement. The Committee of Governors must approve.”
He stressed that Afribank is free to enter into negotiation with any other party.
“There are a lot of things involved in approving an MoU. A lot of investors bring money, but money is not all we are looking at. We also look at the ability to bring corporate governance, risk management. We don’t want what happened to those banks in the past to happen again. We look at the money; we look at the recommendations of the financial advisers.
“The financial advisers appointed by the CBN did not approve the deal; neither did their own independent adviser. In this particular case, there was an attempt by an investor to acquire two banks even when they have not established a track record of managing a commercial bank previously. Note, that we did not even allow any other bank to acquire more than one of the rescued banks, let alone a private equity,” Moghalu explained.
He reiterated that the banking watchdog has a primary responsibility of ensuring financial system stability.
The CBN Deputy Governor added: “The depositors are the number one priority of the CBN, followed by the depositors and then the shareholders. Banks hold depositors funds in trust. It is a sacred trust that banks have”.