The Supervising Minister of Finance, Zainab Ahmed, on Friday expressed serious concerns over the rising incidence of non-performing loans (NPLs) in deposit money banks (DMBs) in the country.
Ahmed urged the financial sector regulating authorities and insurers, the Central Bank of Nigeria (CBN) and the Nigerian Deposit Insurance Corporation (NDIC) respectively, to use the defunct Skye Bank as a test case by fully investigating and prosecuting all directors and executive management who contributed to its collapse to restore confidence in the system.
The minister who gave the directive in Abuja when she visited the executive management of the NDIC led by its Managing Director/Chief Executive, Umaru Ibrahim, said the investigation and prosecution should be extended to all other DMBs in liquidation.
“The spate of non-performing loans in the banking industry has become very worrisome. Although the bail-out of distressed financial institutions was necessary in the interest of the stability of the banking system, emphasis should also be placed on the investigation and prosecution of delinquent Board of Directors and Executive management of financial intuitions who abused the trust placed in them by depositors,” the minster noted.
The minister urged the CBN and NDIC to use the recent failure of the defunct Skye Bank Plc as an opportunity to deal decisively with any of its directors and management found in the course of the investigations culpable, so as to serve as a deterrent to other operators in the financial system.
She said the federal government was no longer prepared to treat with levity such serious infractions in the financial system.
In his welcome address, the NDIC MD assured the minister the corporation would do all within its capacity to assist in the recovery of all the debts owed the defunct Skye Bank and other DMBs in liquidation.
Umaru equally expressed the corporation’s determination to ensure all directors found to have perpetrated any illegalities in running the bank were fully investigated and prosecuted by appropriate authorities.
He said the primary concern of the NDIC was to ensure the safety of depositors’ funds and minimise the disruption of banking services.
The NDIC MD informed the minister that since 1991, the aggregate payment to depositors, creditors and shareholders of 46 closed banks amounted to N11.75 billion.
Out of this amount, he said total payments to insured depositors of DMBs amounted to about N8.252 billion.
Besides, he said about N2.89 billion was paid out to insured depositors of microfinance banks (MFBs), covering about 81,657 individual accounts, with about N69.6 million paid to insured depositors of primary mortgage banks (PMBs).
In addition, about 46 DMBs are currently in liquidation across the country.
The NDIC boss assured the minister the corporation had to adopt the most appropriate failure resolution mechanism in handling the defunct Skye Bank case to save the jobs of over 6,000 employees.
He said the option adopted by the regulating authorities was to ensure its depositors continued to operate their accounts with the new bridge bank, Polaris Bank Limited, which took over the entire assets and liabilities of its predecessor.
On the corporation’s contribution under the Fiscal Responsibility Act (FRA), Umaru said about N175 billion was paid by NDIC under the Act.
At the end of the Monetary Policy Committee (MPC) meeting last week in Abuja, CBN governor, Godwin Emefiele, said the committee expressed serious concerns about rising NPLs in the financial system.
But, he gave justifications why the CBN and NDIC had to intervene the way they deed in Skye Bank.
Emefiele said when the regulatory authorities found out two years ago that Skye Bank had slipped into negative capital as a result of non-performing loans, the CBN was compelled to ask the entire board and the executive management, led by Tunde Ayeni, to resign.
He said prior to the forensic audit conducted in the bank, its NPLs stood at about N370 billion, ballooning to close to N800 billion after the forensic audit.
“Having established the hold on the bank at this level, if tax payers’ monies would be invested in the bank as a loan, there was a need to let shareholders know.
“The intervention and the name of Skye Bank had to be changed for legal reasons having gotten to a point where the CBN and government had invested close to N800 billion to keep the bank until new investors that can pay a price for the bank is found,” he said in response to a reporter’s question.