Contrary to insinuations that the that the Central Bank of Nigeria (CBN) and Nigeria Deposit Insurance Corporation (NDIC) could have resuscitated rather than outright liquidation of Fortis MFB, the corporation on Thursday reminded all that the action taken is usually the last option after all else have failed.
In a statement by Mohammed Kudu Ibrahim, its spokesman on Thursday, the NDIC recalled that the bank had started struggling and showing signs of trouble in 2016, when it was unable to present its 2016 financial accounts to the Nigerian Stock Exchange (NSE). Its shares were subsequently suspending from trading on the bourse.
The NDIC “noted that the various examinations and supervisory interventions of CBN and NDIC revealed that the bank was being run in an unsafe and unsound manner leading to huge non-performing loans, high cost of funds (foreign and domestic borrowings, and fixed/term deposits), exorbitant administrative and personnel costs (especially high emoluments to successive CEOs), and poor corporate governance practices.”
All of these, the corporation added, impacted negatively on its financial condition and the inability to honour maturing obligations to depositors, having become insolvent and illiquid.
“The unhealthy condition of the bank degenerated to the extent that the CBN removed the management of Fortis MFB Plc in February 2018 and appointed a four-person Interim Management Committee (IMC) to take over the control and management of the bank.
“The IMC which comprised of officers drawn from the CBN and NDIC, as well as an independent Chairman, were mandated to steer the bank back to sustainability. The IMC managed the affairs of Fortis MFB Plc for a period 10 months during which it did all it could to resuscitate the bank and began reimbursing depositors, using funds advanced by CBN for that purpose,” it stressed.
NDIC said due to the mismanagement of the bank by its erstwhile board and management, the IMC could not salvage Fortis MFB, hence its eventual liquidation.
All of these steps the corporation added further are contrary to claims by Mallam Garba Kurfi, managing director of APT Securities & Funds Ltd, that the CBN and NDIC made no prior attempt to salvage the ailing bank before its eventual liquidation.
The statement recalled Daily Trust Newspaper of Friday, February 8, 2019, as quoting Alhaji Kurfi, describing the liquidation as hasty, insisting that managing affairs of the bank, its resale or the appointment of a new management would have been better handled for the good of depositors and other banks that had business relationship with Fortis as well as the economy at large.
Daily Trust had also quoted Boniface Okezie, National Coordinator of Progressive Shareholders Association of Nigeria (PSAN) as expressing the view that regulators devise other means of solving instead of aggravating problems in the financial industry through liquidation. He also alleged that Nigerian shareholders, in general, were ultimate victims of the liquidation of banks without any hope of compensation.
Ibrahim further described both allegations as false and misleading in every material particular and that operators in the banking system are aware that the liquidation of ailing banks is always the last option adopted by the NDIC after other cost-effective resolution options have failed. In all instances, the safety of depositor’s funds is the primary concern of the Corporation.
“Depositors of banks always come first in the order of settlement of claims in the liquidation process. On the other hand, the shareholders of failed banks are always the last to be paid after the settlement of their depositors and creditors.
“It is however, common knowledge that shareholders are part of the governance structure of the affected banks, through the control they exercise over the Board and Management of their banks during the Annual General Meetings and Extra Ordinary General Meetings, as well as through appointment of Directors and Auditors of their banks. Accordingly, they cannot be absolved from the misdeeds of their Boards,” he added.