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Nigeria: Troubled Bank Debtors Get Generous Loan Waivers

by Business News Report

TO recover fully the principal of their non-performing loans, the management of some of the nine troubled banks have started negotiations with key debtors who have applied for forbearance.
This is coming as the Economic and Financial Crimes Commission, EFCC, has summoned all debtors of Bank PHB Plc, Equitorial Trust Bank Ltd, Spring Bank Plc to its annex headquarters in Lagos today. Some of the debtors have already been given generous waivers.
Vanguard reliably gathered that in one of the first five banks which failed the audit report of the Central Bank, in the first round, a debtor who owed the bank N11 billion applied for forbearance while the management has approved 70 per cent waiver for him.
However, it was not yet known if the waiver was the accumulated interest or part of the principal loan granted to the debtor-client.
Also, another customer who owes the bank N1.5 billion was said to have applied for forbearance and got about N500 million waiver. The debtor was billed to pay N1bn but what was said to have reached the bank’s vault was N800 million. The balance of N700 million was given as waiver to the debtor.

In another bank, a customer who is said to be owing N7.5 billion was said to have had his entire indebtedness written off.
Bankers are, however, worried that this may negate the current reform of the banking industry.
CBN Governor, Mr. Lamido Sanusi, had told newsmen in Istanbul that the Central Bank will not get involved in the day-to-day running of the troubled banks. He said that the onus of running the banks was in the hands of the managements and the boards.
However, bankers, while stating that it is normal for a long-standing non-performing loans considered lost and written off the books of a bank to be so treated, are worried that most of the banks bailed out by CBN have no functional board. They argued that almost, if not all, board committees in these banks are non-functional, leaving the decision to the Managing Directors, some of whom are acting as sole administrators.
The discretion of some of these chief executives may not be in the interest of reviving the ailing banks, they argued. They also said it is only the accumulated interest and penalty that are built into a loan term that can be granted as waiver not the principal.
Furthermore, the bankers argued that at a time when the Economic and Financial Crimes Commission, EFCC, is busy recovering debts from chronic debtors, it would seem too early in the day for the management of the troubled banks to begin to give waivers without the approval of the board.
Such money, they argued, if recovered, will beef-up the capital or shareholders’ funds which the non-performing loan has grossly eroded.
Meanwhile, the Cnetral Bank said, last Friday, that the action it took in respect of Bank PHB Plc, Spring Bank Plc, Unity Bank Plc, Wema Bank Plc and Equatorial Trust Bank Ltd was aimed at strengthening their financial condition and the protection of depositors and creditors’ funds.
CBN and the management of the banks, it said, are putting in place measures to ensure that no bank fails to meet its obligations to depositors and creditors. In the unlikely event of any of the banks defaulting in its foreign/correspondent bank obligations, CBN affirmed that it will fully repay such obligations. It assured that the banks are safe and reiterated its commitment at ensuring the stability of the banking sector.
The apex bank, however, enjoined the relevant correspondent banks and other interested stakeholders to feel free to contact its Director, Banking Supervision Department, for any enquiries or clarifications.

In a related development, the financial advisers of the four troubled banks in the second phase of the banking reform have issued a public communication guideline for the management and staff of the affected banks, urging them to continue to insist that the banks are healthy and in sound financial condition.
The financial advisers are Deutsche Bank, Chapel Hill and Stanbic IBTC Bank. In the holding statement issued by the three financial advisers, the staff of the banks were directed to continue to say: “Our bank is strong and has enough capital and liquidity.”
The guideline reveals that it was agreed between the regulators and the advisers that the following shortholding statement should guide responses from staff when answering questions from the public that, “The Special Examination was undertaken by the CBN, all questions about it should be addressed to the banks’ advisers, but must state that the CBN has announced that our bank is strong and has enough capital and liquidity to support itself now and in the future, we are continuing to work normally and we have benefited from the successful actions of the CBN to maintain stability in the banking sector.
“We intend to remain a major player in Nigeria’s banking sector and we are looking at a number of ways of increasing capital and liquidity, and improving the corporate governance of the bank to support the development of the bank in the future.” For the top management, they advisers advise them to say “it is too early to comment, as we review them, together with the CBN. When we have some news about our decisions we will certainly inform you”

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