The Central Bank of Nigeria (CBN) on Thursday removed Mr. Oba Otudeko and Mrs. Ibukun Awosika as Chairman of First Bank Holdings Company and Chairman, First Bank of Nigeria Plc respectively.
The bank also removed all the directors of the bank and the holding company.
At a press conference in Abuja, the CBN Governor, Mr. Godwin Emefiele, said Otudeko on three occasions rejected his entreaties not to remove Mr. Sola Adeduntan as managing director of the bank without making recourse to CBN, which has been providing regulatory forbearance to since 2016.
Emefiele stated that : “CBN’s recent target examination as at December 31, 2020 revealed that insider loans were materially non-compliant with restructure terms (e.g. non perfection of lien on shares/collateral arrangements) for over three years despite several regulatory reminders.
“The bank has not also divested its non-permissible holdings in non-financial entities in line with regulatory directives.”
The governor, who acknowledged the ordinary powers of the board to appoint or remove the managing director, however, stated that with substantial stake of CBN, it should have been taken along when such decision was being considered.
He noted that considering the regulatory forbearance and intervention of CBN since 2016, “It was therefore surprising for the CBN to learn through media reports that the board of directors of FBN, a systemically important bank under regulatory forbearance regime, had effected sweeping changes in executive management without engagement and/or prior notice to the regulatory authorities.
“The action by the board of FBN sends a negative signal to the market on the stability of leadership on the board and management and it is in light of the foregoing that the CBN queried the board of directors on the unfortunate developments at the bank.
The CBN governor added that First Bank maintained healthy operations up until 2016 financial year when the CBN’s target examination revealed that it was in grave financial condition with its capital adequacy ratio (CAR) and non-performing loans ratio (NPL) substantially breaching acceptable prudential standards.
According to him, “The problems at the bank were attributed to bad credit decisions, significant and non-performing insider loans and poor corporate governance practices.
“The shareholders of the bank and FBN Holdings Plc also lacked the capacity to recapitalize the bank to minimum requirements. This conclusions arose from various entreaties by the CBN to them to recapitalise.
The CBN stepped in to stabilise the bank in its quest to maintain financial stability, especially given FBN’s systemic importance as enumerated earlier. Regulatory action taken by the CBN in this regard included:
‘Change of management team under the CBN’s supervision with the appointment of a new “Managing Director/ Chief Executive Office in January 2016.
‘Grant of the regulatory forbearances to enable the bank work out its non-performing loans through provision for write off of at least N150b from its earning for four consecutive years.
Grant of concession to insider borrower to restructure their non-performing credit facilities under very stringent conditions
‘Renewal of the forbearances on a yearly basis between 2016 and 2020 following thorough monitoring of progress towards exiting from the forbearance measures.
“The measures had yielded the expected results as the financial condition of FBN improved progressively between 2016 when the forbearance was initially granted to the current financial year.
“For instance, profitability, liquidity and CAR improved whilst NPL reduced significantly.
Notwithstanding the significant improvement in the bank’s financial condition with positive trajectory of financial soundness indicators, the insider related facilities remained problematic.
“The insiders who took loans in the bank, with controlling influence on the board of directors, failed to adhere to the terms for the restructuring of their credit facilities which contributed to the poor financial state of the bank.”
