Business
CBN to liquidate four banks
By Vanguard - By Omoh Gabriel & Emma Ujah
Dec 23, 2005, 10:28

LAGOS—FOUR banks may be liquidated on account of their inability to comply with the apex bank’s minimum capital requirement. Indication to this effect emerged yesterday after eight banks were given a temporary relief by the CBN, granting the Alliance Group Approval-in-Principle to merge on very stiff conditions.

The approval given to the bank, according to CBN spokesman, Mr. Festus Odoko, is predicated on two conditions. That the banks involved should recover a substantial percentage of all insider related credits by December 30 and the organisational structure of the proposed Alliance Bank be submitted to the CBN detailing the board members and management.

According to Alliance Bank sources, the CBN approval-in-principle was contained in a letter signed by Mr. J. A Aladejobi of the banking supervision department of the CBN where the Alliance Group was asked to go ahead with the merger plan but must hold the court-ordered Extra Ordinary General Meeting of the shareholders.

The eight banks that make up the Alliance Group are to hold their EGM on Wednesday. This has ended speculations that the eight banks may be liquidated come January 1, 2006.

The other four are yet to find any merging partner and CBN official said there was no going back on its position that if by December 31 they could not find merging partners, they would be liquidated.

CBN had on the 14th of last month given the nod for the eight weak banks which could not merge or be acquired by stronger banks to go into a partnership to form the Alliance Bank but within a tight timetable which must end by December 20, 2005 or face liquidation.

The banks are: Fortune Bank, City Express Bank, Metropolitan Bank, Triumph Bank, Eagle Bank, Afex Bank, Liberty Bank, Metropolitan Bank and Gulf Bank.

A marathon meeting between top CBN officials and Chief Executive Officers (CEOs) of the affected banks on Tuesday was inconclusive as sources said the CBN Governor, Prof. Charles Soludo, and his team told the banks that the December 31 deadline remained the effective date to terminate all recapitalisation arrangements.

At the November 14 meeting, the governor told the banks’ MDs that they had to strictly adhere to the timetable or be prepared to surrender their licences on December 20.

His words: “Basically, we have defined certain clear milestones. The first is that by the end of this month all of them would have held their Extra-Ordinary General Meetings (EGMs). During the meeting, they ought to have passed resolutions to pursue the Alliance Bank option to get the banks recapitalised under the Alliance Bank.

“But where they fail to achieve that, they would also have a concurrent resolution which they will also hand in to us, authorising us to then liquidate the banks if they fail to achieve it as a group.

“And by December 7, 2005, we expect to receive both the resolutions and the licences of the banks. By December 14, 2005, we will meet to evaluate the progress being made and by December 20, 2005 we will meet again to take a final evaluation.

“And as at that date, we will be able to make a final determination as to whether they would most likely cross over or not. If they are not, we can then take a summary decision as at then.”

Sources said CBN management was divided on whether or not an extension should be granted the eight weak banks to enable them pull through rather than liquidating them with the attendant deposit liabilities responsibilities on the path of the Nigeria Deposit Insurance Corporation which has to pay the depositors their insured deposits.


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