Oct 3rd, 2011 – The recent nationalisation of some commercial banks, and the process of their recapitalisation by the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) was against due process, the House of Representatives Committee on Capital Market and Financial Institutions has said.
Chairman of the Committee, Hon. Hernan Hembeh, disclosed that it would investigate the decline in the capital market with specific reference to nationalisation of banks and the new trend in recapitalisation, in compliance with Sections 88 and 89 of the 1999 Constitution (as amended). He argued that the market had declined to an unenviable level due to certain interventions in the system. According to him, the All Share Index, which rose to 57,990.22 points as at December 31, 2007, and market capitalisation of N13.29trillion with over 300 listed securities on the Nigeria Stock Exchange (NSE) had witnessed a crash to 20,202.50 points and a market capitalisation value of N6.44trillion, a 56 per cent decline in about four years.
“Let me particularly point to the ongoing mergers and acquisition of banks, which operations fall directly within the purview of this Committee. The process has largely been flawed. Laws, rules and procedures have not been followed. We will step in to ensure the rule of law,” he said.
“Since my appointment, I have received quite a number of petitions regarding these mergers, particularly with respect to the fact that some very high bids were disregarded in favour of lower ones. It is my resolve and that of this Committee to intervene in the best interest of the Nigerian investor.”
The House Committee on Capital Market and Institutions was inaugurated alongside 88 other standing committees last Thursday with a mandate to right the wrongs in the finance sector.
Recall that in a bid to stabilise the banking industry for greater productivity, the CBN had recently revoked the licenses of Spring Bank, Bank PHB and Afribank. The three banks were among 10 financial institutions that failed CBN’s stress test in June 2009; while Unity and Wema banks repositioned their operations to stay afloat.
New core investors from Access Bank then sealed a merger business deal with Intercontinental Bank; First City Monument Bank with Finbank; Union Bank with Equitorial Trust Bank; while Ecobank Transnational signed a merger agreement with Oceanic Bank International.
With MainStreet Bank Limited licensed to take over Afribank, Keystone Bank Limited assumed the assets and liabilities of Bank PHB, while Enterprise Bank Limited fully took over Spring Bank. The three bridge banks acquired the assets and liabilities through purchase and assumption models earlier used by the apex bank during the tenure its former governor, Charles Chukwuma Soludo.
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