THURSDAY, 24 JUNE 2010 BY

 

The Ministry of Finance and CBN remain convinced that with the setting up of this corporation, the nation is close to a final resolution of the banking crisis and the repair of banks’ balance sheets.

 

Finally, the Asset Management Corporation of Nigeria (AMCON) bill, was yesterday, passed by the National Assembly, following its harmonisation by the committee set up by its two chambers and eventual adoption.The bill, currently awaiting the assent of President Goodluck Jonathan, would pave way for the purchase of non-performing assets from banks.A statement from the Central Bank of Nigeria (CBN), signed by its Head of Corporate Communications, Mohammed Abdullahi, stated that the bill would be submitted to President Jonathan for his assent, “after which it becomes an Act of the National Assembly.

 

The bill is also expected to inject needed capital into banks and facilitate mergers and acquisitions in the banking industry.Also, it will ensure that shareholders recover part of their lost investment and assist in reducing the debt overhang that had slowed down recovery or the capital market. The CBN statement added that “the Ministry of Finance and CBN remain convinced that with the setting up of this corporation, the nation is close to a final resolution of the banking crisis and the repair of banks’ balance sheets.”

 

The House of Representatives had earlier adopted the AMCON’s harmonised bill and transmitted to the Senate for concurrence.The Senate, passed the bill with some amendments, which necessitated a joint conference of the two chambers on Tuesday, May 18, where a harmonised version of the legislation was adopted.CBN had lobbied for the establishment of the company to buy up non-performing loans in exchange for government bonds, in order to free up banks’ balance sheets.The bill was presented to the National Assembly as an executive bill on the heels of the distress in the banking sector and the N620 billion bailout intervention by the CBN.

 

The capital of many of the banks had been eroded by bad loans that exceeded N2 trillion, which resulted in heavy provisioning in excess of N1.5 trillion by the last quarter of last year.Analysts pointed out that buy-over of the bad assets of the banks will not only permit them to resume lending but will clean up their books for fresh investors to participate in the recapitalisation process.
Specifically, AMCON, according to the bill, would, among others: 

 

• Assist eligible financial institutions to efficiently dispose of eligible bank assets in accordance with the provisions of this Act; 

• Efficiently manage and dispose of eligible bank assets acquired by the corporation in accordance with the provisions of this Act; 

• And, obtain the best available financial returns on eligible bank assets or other assets acquired by it in pursuance of the provisions of this Act (having regard to the need to protect or otherwise enhance the long-term economic value of those assets, among others).

 

AMCON is expected to offer a window through which the banks can discount voluntarily any non-performing loan that is above 10 per cent of their total share capital.

 

(Source:Guardian)