Banks in shotgun marriage

LAGOS – Eleven small Nigerian banks have agreed a shotgun marriage hours before the expiry of a deadline to meet new capital requirements and avoid intervention, banking sources said on Monday.

The central bank had threatened any bank that failed to specify plans to meet a new 25 billion naira(about US$193 million) capital minimum by Monday with intervention, closure and/or liquidation. The last-minute deal to create Alliance Bank, whose members include some of the country’s weakest banks, emerged at a meeting with central bank Governor Charles Soludo over the weekend and is not certain to obtain approval, bankers said.Some of the group’s members are already bankrupt while others have stopped paying depositors.”Even if they pull it off, as soon as they open their doors, there would be a stampede (to withdraw funds),” said a bank CEO, asking not to be named.The central bank was not available for comment.The latest merger proposal brings to 23 the number of new banking groups to have emerged from an 18-month consolidation process driven by the new requirement.Most of these groups meet the 25 billion naira minimum, although a few do not.Four of the new groups – Access Bank, First Inland Bank, Intercontinental Bank and UBA – have legally concluded their mergers by holding shareholder meetings to ratify them.Most of the others have obtained pre-merger consent from the central bank, the first in a three-phase approval process.Three banks have indicated their intention to remain independent and meet the requirement alone, while another three have failed to specify plans to meet it.However, the number of banks vulnerable to intervention is greater than that because some proposed mergers may change composition or fall apart.And one of the three banks still on the danger list, Standard Bank unit Stanbic, may still escape intervention if it can persuade regulators that its merger talks are sufficiently well advanced.Soludo said earlier this month 97 per cent of the industry had almost met the new requirement and that less than five per cent of depositors’ funds were at risk.The Nigerian Deposit Insurance Corp.is legally required to pay up to 50 000 naira to each depositor in case of a bank failure, although lawmakers have proposed raising this to 200 000 naira.Banks have raised 264 billion naira from the local bourse through equity issues since July 2004, and 6,7 billion naira was injected from abroad through the capital market.The central bank earlier in the month assumed control of Allstates Trust Bank after it stopped paying depositors’ money, and bankers said it is now in merger talks with Zenith Bank.Directors of at least three banks are under investigation for fraud and have had their passports seized by law enforcement officials.Nigeria had 89 banks at the beginning of the consolidation process in July last year, including two small commercial institutions that were already bankrupt.-Nampa-ReutersThe last-minute deal to create Alliance Bank, whose members include some of the country’s weakest banks, emerged at a meeting with central bank Governor Charles Soludo over the weekend and is not certain to obtain approval, bankers said.Some of the group’s members are already bankrupt while others have stopped paying depositors.”Even if they pull it off, as soon as they open their doors, there would be a stampede (to withdraw funds),” said a bank CEO, asking not to be named.The central bank was not available for comment.The latest merger proposal brings to 23 the number of new banking groups to have emerged from an 18-month consolidation process driven by the new requirement.Most of these groups meet the 25 billion naira minimum, although a few do not.Four of the new groups – Access Bank, First Inland Bank, Intercontinental Bank and UBA – have legally concluded their mergers by holding shareholder meetings to ratify them.Most of the others have obtained pre-merger consent from the central bank, the first in a three-phase approval process.Three banks have indicated their intention to remain independent and meet the requirement alone, while another three have failed to specify plans to meet it.However, the number of banks vulnerable to intervention is greater than that because some proposed mergers may change composition or fall apart.And one of the three banks still on the danger list, Standard Bank unit Stanbic, may still escape intervention if it can persuade regulators that its merger talks are sufficiently well advanced.Soludo said earlier this month 97 per cent of the industry had almost met the new requirement and that less than five per cent of depositors’ funds were at risk.The Nigerian Deposit Insurance Corp.is legally required to pay up to 50 000 naira to each depositor in case of a bank failure, although lawmakers have proposed raising this to 200 000 naira.Banks have raised 264 billion naira from the local bourse through equity issues since July 2004, and 6,7 billion naira was injected from abroad through the capital market.The central bank earlier in the month assumed control of Allstates Trust Bank after it stopped paying depositors’ money, and bankers said it is now in merger talks with Zenith Bank.Directors of at least three banks are under investigation for fraud and have had their passports seized by law enforcement officials.Nigeria had 89 banks at the beginning of the consolidation process in July last year, including two small commercial institutions that were already bankrupt.-Nampa-Reuters