By Ademola Alawiye   Wednesday, 22 Sep 2010

 

Indications have emerged that the Deposit Money Banks that were rescued by the Central Bank of Nigeria last year may have representatives from the Asset Management Company of Nigeria on their boards if they fail to grow their shareholders‘funds from negative levels.

 

A source in one of the rescued banks told our correspondent on Tuesday, that the banks had started a fresh run to recover non-performing loans so as to reduce the bad loans that would be bought by the AMCON.

The source, who pleaded anonymity, said that the level of financial accommodation required by any of the rescued banks from AMCON would determine if the corporation would have members on the board of that bank.

 

He said, “Banks have started a fresh move to recover bad loans in order to reduce their dependence on AMCON. The level of bad loans AMCON will buy from your bank will determine if AMCON will have representatives on the board of your bank.”

 

The AMCON is expected to stimulate the recovery of Nigeria‘s financial system from a recent crisis by boosting the liquidity of troubled banks through the purchase of their non-performing loans.

 

The corporation will also help in the recapitalisation of the banks in which the CBN was forced to intervene and increase access to restructuring and refinancing opportunities for borrowers.

 

President Goodluck Jonathan had said while signing the bill into law, that the long awaited corporation would help in boosting confidence in banks‘ balance sheets and Nigeria‘s credit and risk ratings, restore confidence in Nigeria‘s capital markets and prevent continued job losses in the banking industry.

 

Meanwhile, financial experts, who spoke with our correspondent, said that there was nothing wrong with AMCON having representatives on the board of the banks after buying a large portion of non-performing loans from the bank.

 

A financial expert with Diamond Investment Company Limited, Mr. Gbadesola Oni, said that AMCON could have representatives on any of the banks’ board if their survival depended on the corporation.

He said, ”Whether AMCON will have representatives will depend on the financial assistance required from the corporation to bring the banks’ shareholder fund to zero level.

 

“If the sale of the non-performing loans is able to close the gap without additional financial accommodation, then AMCON should not have any representative on the banks’ board.”

 

He added, “You don‘t expect the corporation not to be part of decision making in the banks after buying a large percentage of their bad loans. AMCON will be buying close to 80 per cent (by value) of the non-performing loans of some of the banks.”

 

The Minister of Finance, Mr. Olusegun Aganga, had said recently that the ministry and the CBN had already provided the N20bn share capital set in the AMCON Act for the corporation‘s take-off, adding that its operations could not be delayed till next year.

 

Source: The Punch