AMCON Injects N679.5b Into 3 Troubled Banks

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Chike Obi

Chike Obi

The Asset Management Corporation of Nigeria (AMCON) has injected N679.5b into the three troubled banks.
The Managing Director of Nigeria Deposit Corporation of Nigeria (NDIC), Mr Umaru Ibrahim, who disclosed this yesterday, added that it had sold the three bridge banks that were created on Friday to AMCON through a subscription agreement with the three new banks.

The Central Bank of Nigeria (CBN) had revoked the licenses of Springbank, Afribank and Bank PHB on Friday and transferred their assets and liabilities to newly formed ‘Bridge Banks’ by the NDIC.

Ibrahim, disclosed this in Lagos yesterday at a media briefing, where the agreement on transfer of ownership of the banks to AMCON was also signed.
But Ibrahim pointed out that by the subscription agreement, AMCON is now the owner of the three banks saying that the corporation would provide sufficient capital to restore the banks to the level of capital adequacy stipulated in their operations.

He said, “With the successful sale of the Bridge Banks, the NDIC has fulfilled its primary objectives of ensuring that the depositors in the banks do not lose their funds. The capital provided by AMCON through shares subscriptions will strengthen the banks’ liquidity to enable them carry on business and meet all their obligations as they fall due. The liquidity position of the banks will be further enhanced by the willingness of the CBN to extend the guarantee of their interbank obligations until December 31.

“AMCON has identified independent and credible persons with significant and required experience to fill the board and senior management positions for the banks and will be seeking the approval of the CBN for their appointments. AMCON is confident that the new teams will manage the banks to establish strong market positions and effectively compete in the Nigerian banking sector.”
The NDIC had on Friday said that the revocation of the operating licences of the affected banks were because they did not show the necessary capacity and ability to recapitalise within the September 30 deadline.

Speaking on the injection of the N679.95b into the three banks, the Managing Director and Chief Executive Officer of AMCON, Mr. Mustapha Chike-Obi, said the funds would enable the banks to raise their capital adequacy ratio to 15 per cent respectively and also and put them in a position to be able to pay back the sum that was injected into the erstwhile rescued banks by the CBN in 2009.

Chike-Obi said, “AMCON will inject N285.4b into Mainstreet Bank, formerly Afribank, N283.08b into Keystone Bank, formerly BankPHB, and N111.47b into Enterprise Bank, formerly Spring Bank.”
He added that the primary objective of the capitalisation of the banks was to stabilise the banking system.
He said, “The decision to take-over the banks was done with a lot of thought, a lot of consultation and the primary objective is to stabilise the banking system. We need a stable banking system. Also, we have also emphasised that no depositor will lose any money. That was the mandate give to the regulatory authority and that is the mandate we are all pursuing.”

He also said that the depositors’ funds were safe, saying the employees had nothing to fear, as the banks would now operate in a stronger position than they were yesterday. “AMCON will oversee these banks, the management will run these banks as going concern and CBN will regulate these banks in pursuant to its mandate,” he added.

He continued “this is not a case of government interference, this is a case of government what it was expected to do. This is been done in pursuant to the provision of the AMCON Act 2010 and we hope that these banks will in the future be seen as shining, individual competitive entities.”
Chika –Obi also said that AMCON would now supervise the management of these banks of the newly incorporated banks that took over the three banks .
AMCON will capitalise the new Bridge Banks, before finding new investors, which may take at least two or three years.”
But Chika– Obi said all the funds to be injected would take place by Monday through the issuance of bonds.

The Deputy Governor, Financial System Stability of the CBN, Mr. Kingsley Moghalu, stated that recapitalisation agreements signed with investors by four of the other rescued banks would solve around 80 per cent of the banking crisis and the bailout package would be recouped from all rescued banks.
“We believe we have drawn a line under the banking crisis. By September 30, all banks in Nigeria will be fully capitalised,” Moghalu said.
The NDIC boss had on Friday said the three bridge banks would acquire the assets and liabilities of the affected banks through the purchase and assumption model earlier used by the apex bank under Chukwuma Soludo as CBN Governor.

He added that the three affected banks were among the 10 that failed the CBN stress test conducted in June 2009, following which Wema and Unity Bank resolved their troubles, Access Bank have emerged for Intercontinental; Finbank, First City Monument Bank; Ecobank Transnational Incorporated (ETI) for Oceanic Bank

International; Union Bank had emerged with Africa Capital Alliance while Equitorial Trust Bank, had reached advance stage in its recapitalisation process.
He said that the executive managements of the affected banks appointed by the CBN on August 14, 2009 had been transferred to the NDIC, saying they would now work with the NDIC, while the brand names seize to exist and were to be replaced by the new identities.

Ibrahim said “The corporation is encouraged by the provision of the Bridge Bank option in our law, to resolve the problems in the banking sector.”
“The bridge bank option is a veritable tool of enhancing depositor protections and promoting confidence by ensuring seamless continuity of banking operations.”
AMCON was set up last year to absorb bad bank loans, exchanging them for government-backed bonds with the aim of rebuilding commercial bank balance sheets.
 

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