OBAZEE REPORT…CBN Wields Big Stick, Sacks Banks’ Boards

President Bola Tinubu appears to have started the implementation of the report of the special investigation headed by Jim Obazee on the Central Bank of Nigeria (CBN) which indicted the former governor of CBN, Godwin Emefiele, some banks and other private entities.

Yesterday, the CBN Governor Olayemi Cardoso ordered the dissolution of boards and managements of three banks – Union Bank, Keystone Bank, and Polaris Bank – that were indicted by the Obazee-led probe panel.
All the banks were acquired through questionable transactions, the investigative team had claimed.
In a press statement issued last night by the central bank’s spokeswoman, Sidi Ali Hakama, the apex bank attributed the dissolution of the banks’ managements and boards to non-compliance with the provisions of the Banks and Other Financial Institutions Act, 2020.

It also said that the banks were engaged in infractions ranging from regulatory non-compliance and corporate governance failure to disregarding extant laws.
“This action became necessary due to the non-compliance of these banks and their respective boards with the provisions of Section 12(c), (f), (g), (h) of Banks and Other Financial Institutions Act, 2020. The Bank’s infractions vary from regulatory non-compliance, corporate governance failure, disregarding the conditions under which their licences were granted, and involvement in activities that pose a threat to financial stability, among others.

“The CBN assures the public of the safety and security of depositors’ funds and remains resolute in fulfilling its mandate to uphold a safe, sound, and robust financial system in Nigeria. Our Banking system remains strong and resilient,” Hakama said in the statement.

No details were provided into the specific offences that were committed by the boards and managements of the banks. That further gives credence to the insinuations that President Tinubu was simply implementing the recommendations of the Obazee report which asked the authorities to take over management of the affected banks to allow for unfettered investigation into their books.

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The panel had claimed that it uncovered how Emefiele birthed Titan Trust Bank (TTB) to acquire Union Bank of Nigeria, an allegation that was firmly disputed by the bank.
The report said Emefiele used two Dubai-based companies — Luxis International DMCC (Luxis) and Magna International DMCC (MAGNA) — owned by Vink Corporation Middle East FZC, to set up Titan Trust Bank as proxies.

The panel also claimed that Keystone Bank was acquired without payment evidence. The document showed previous acts of corruption and theft in the CBN, perpetrated by senior officials of the bank.
The report accused Emefiele of using proxies to acquire Union Bank of Nigeria for Titan Trust Bank Limited, as well as Keystone Bank without any evidence of payment, a reason it said the federal government should reverse the sale of the banks and also take them over.
“We were able to secure some documents and investigation reports will lead to the forfeiture of the two banks to the federal government. We have completed our investigation on this acquisition and have also held meetings with the relevant parties except for Mr Cornelis Vink, who is currently hospitalised in Switzerland.
“Otherwise, we are on the verge of recovering these two banks for the federal government,” Obazee said in the report he submitted to President Tinubu on November 9 2023.

Banks Boards Dissolution May Dampen Investors Interest Ahead Of Recapitalisation
Meanwhile, industry watchers say the move by the apex bank to dissolve the boards and management of Union Bank, Keystone Bank and Polaris Bank has sent a strong signal that the apex bank will be taking firm actions against infractions.
However, analysts say the move may dampen banks’ prospects of raising capital ahead of the recapitalisation announced by the CBN late last year, if the apex bank does not give more details about its decision to dissolve the board of the banks.
The investigative committee set up by President Bola Ahmed Tinubu and led by Jim Obazee had earlier called for the dissolution of the boards of the banks and a revocation of the sales, saying they did follow due process.
A statement issued by the apex bank last night, however, gave assurance to the public about the safety and security of depositors’ funds and its commitment to fulfilling its mandate to uphold a safe, sound, and robust financial system in Nigeria.

“Our banking system remains strong and resilient,” it said.
A banker who spoke with LEADERSHIP on anonymity said the latest move by the CBN “is a strong signal that it is not here to play. It is a warning that anyone that does not play by the rules will have it tough.”
On his part, the head, financial institutions at Agusto & Co, Ayokunle Olubunmi stated that the CBN needs to give more clarity on the reasons it gave for the dissolution of the boards and management of the banks so as not to dampen foreign investors’ interest in Nigerian banks, especially as they dive into a recapitalisation phase.
“A look at the sections of the Banks and Other Financial Institutions Act (BOFIA) that was violated shows that section 12c says if it “fails to fulfil or comply with any conditions subject to which the license was granted.”
Subsection F of the same act also says if it “is involved in a situation circumstance action or inaction which constitutes a threat to financial stability” while G says if it “fails to comply with any obligation imposed upon it by or under this Act or the CBN Act or any other rule/regulation/guideline or directive made hereunder.

“Subsection H quoted says if it “is in the opinion of the bank critically undercapitalised with a capital adequacy ratio below the prudential minimum or such other ratio as the bank may prescribe.”
Olubunmi said that looking at Section H, Keystone falls into that category as the bank has negative capital for a while but the CBN needs to give more explanation so as not dampen the confidence in the banking industry both local and foreign investors .

“Looking at the sections the CBN quoted, when it gets to Section H Keystone is undercapitalized, and Section F needs to be cleared on which of the banks is involved in that activity, if any. Keystone is not the only bank that has negative capital; there are like four of them, so the CBN needs to give more explanation, so that it would not be seen as a vindictive move targeted at some particular persons as this would affect confidence in the industry, particularly given that the industry is about going into a recapitalisation mode.”