Lagos — The Central Bank of Nigeria Friday withdrew the banking licenses of Afribank Plc, Spring Bank Plc and Bank PHB Plc because "the three rescued banks have not shown the necessary capacity and ability to beat the September 30 recapitalisation deadline."
The Nigerian Deposit Insurance Corporation (NDIC) has swiftly stepped in, creating three bridge banks (temporary banks) to acquire the assets of the banks so as to continue operations on a fresh note.
Bridge banks are temporary banks set by a regulator to administer the deposits and liabilities of a failed bank.
Enterprise Bank Limited, Keystone Bank Limited and Mainstreet Bank Limited are the bridge banks established to acquire all assets and liabilities of Spring Bank, Bank PHB and Afribank, respectively. The CBN said it had issued banking licenses to the three new banks.
Both the CBN and NDIC assured depositors of the three banks that they have no cause to panic, as their deposits are safe.
Managing Director and Chief Executive Officer, NDIC, Mr. Umaru Ibrahim, who briefed the media in Lagos Friday on this latest development, said the new banks would become operational from Monday.
A statement from the apex bank expressed support for the decision by the NDIC to adopt the "Bridge Bank Mechanism."
The NDIC boss said the decision to create the three bridge banks was in line with the NDIC Act. According to Ibrahim, the corporation consulted with the CBN and Federal Ministry of Finance, before establishing the bridge banks.
The NDIC also said the assets and liabilities of the aforementioned financial institutions have been taken over by the bridge bank.
The NDIC boss disclosed that Equitorial Trust Bank Limited (ETB), one of the rescued banks, was currently in the final stage of its negotiation with a prospective investor, adding that there were strong likelihood that the bank will meet the September 30 deadline.
Ibrahim said: "MainStreet Bank Limited has assumed the assets and liabilities of Afribank, while Keystone Bank Limited has assumed the assets and liabilities of Bank PHB. Enterprise Bank Limited has assumed the assets and liabilities of Spring Bank."
He said that the three bridge banks are local banks.
With this arrangement, Ibrahim said a fresh management would be appointed to manage the banks from Monday.
Commenting on the move by Fidelity Bank Plc to acquire Afribank Plc, he said that the "Board of Afribank decided that they will not go along with Fidelity."
The NDIC boss stressed that the corporation was encouraged by the provision of the bridge bank option in the law governing the country, to resolve the problems in the banking industry.
Ibrahim insisted that the bridge bank option was adopted to prevent the liquidation of the banks, which he pointed out, may have dire consequence on depositors and may also undermine public confidence in the banking system.
He added: "The essence of establishing a bridge bank is to provide for continuity, essentially in banking service and to protect depositors. It is an arrangement with ensures that no depositor losses his money. By Monday, if you are a depositor in any of these banks, you can knock at the door and get your money and it will continue like that, unlike in a situation where you liquidate the banks.
"In the past, we have seen depositors die once a bank is liquidated. But here, you (depositors) have an umbrella that provides you with total protection, until when we are able to get investors to recapitalise these banks."
Ibrahim said further: "The Bridge Bank option is a veritable tool for enhancing depositors' operations and promoting confidence by ensuring seamless continuity of banking operations. The NDIC will operate the Bridge Banks until such a time that we engage the Asset Management Corporation of Nigeria (AMCON) with a view to capitalising the Bridge Banks.
"AMCON is expected to open up negotiation with investors who may be interested in capitalising the Bridge Banks. With this action, a resolution of the crisis in the Nigerian banking system is assured, as it brings certainty and stability to the banking system. It worthy of note, that unlike other parts of the world where depositors lost funds in the resolution of banking crisis, no depositor lost any fund in this reform process in Nigeria."
Director, Assets Mana-gement, NDIC, Mr Adeleke Adedayo, explained further, saying that from Monday, "there will be no bank in Nigeria operating as Afribank, Spring Bank and Bank PHB. The three banks that we have created are the banks that have acquired the assets and liabilities of the banks. If you have money with any of these banks, if you want to use your ATM or from the banking hall, you can go there and withdraw you money."
The CBN and NDIC had in 2009, carried out a special examination of all the 24 banks in the country. Then, 10 banks were adjudged to be in a grave state as they were deficient in capital adequacy.
Afterwards, two of the affected banks - Wema Bank Plc and Unity Bank successfully recapitalised.
The CBN which fixed a September 30 deadline for the recapitalisation of the remaining had earlier threatened to liquidate any bank that fails to beat the deadline. It however soft pedalled, and threatened to nationalise the banks that fail to meet the deadline.
Union Bank Plc, Intercontinental Bank Plc, FinBank Plc and Oceanic Bank International Plc have all reached advanced stages in their respective recapitalisation process.
The three banks spent most of last night sending re-assuring text messages to their customers. One of such messages from BankPHB reads: "Dear customers, effective 08-08-2011, BankPHB Plc becomes Keystone Bank Ltd (KBL). KBL will continue the operations of the bank. Customers' deposits remain safe and protected."
Reacting to the development, National Co-ordinator, Independent Shareholders Association of Nigeria, Sunny Nwosu, said the revocation of the operating licenses of three commercial banks was "a calculated subversion of the three nation's economy and the great people of Nigeria." He urged President Goodluck Jonathan to intervene in the crisis in order to avert negative global response.
He said: "That the CBN resolution of recapitalisation through bridge banks remains an attestation of failure or inept leadership by the current management of the apex bank toward finding a permanent answer to the nation's induced banking problems. ISAN categorically state that the revocation of the operating licenses of the banks will further deepen the crisis of confidence in the domestic financial sector.
On his part, the Managing Director and Chief Executive Officer, Cowry Assets Management Company Limited, Johnson Chukwu, said the action by the regulators was too pre-emptive.