By Stanley Opara

Friday, 10 Dec 2010

The success of the Asset Management Corporation of Nigeria initiative lies crucially on how Nigerian banks perform their roles, the Group Managing Director/Chief Executive Officer, Intercontinental Bank Plc, Mr. Mahmoud Alabi, has said.

Alabi, who delivered a paper on “Operational Modalities of AMCOM: Implications for the Nigerian Banking Industry,” at a Committee of Chief Inspectors of Nigeria’s meeting in Lagos on Monday, said while AMCON‘s mandate covered all the deposit taking banks in the country, its immediate priority and main objective was to assist the ailing banks.

He said AMCON was the principal vehicle in Nigeria for the resolution of the asset quality problems that confronted the banking system in the last two years, adding that it provided an alternative to the liquidation of distressed banks.

“In addition to purchasing non-performing loan of the banks, AMCON is a vehicle for recapitalising the bank,” he said.

The Intercontinental Bank boss said AMCON planned to immediately address the clearing of the margin loans for all the banks to ensure early restoration of activities in the capital market, noting that NPLs of the rescued banks were also expected to be treated by the corporation.

“We view this as a key positive for the balance sheets of the universe of rescued banks as more liquid assets would be hitting their balance sheets and position them to resume core banking functions,” he pointed.

The formation of AMCON, Alabi explained, should facilitate an improvement in banking sector liquidity, protection of the earnings of banks from further erosion and a reduction of the debt overhang on the money and capital markets and its participants; which would in turn revive the nation‘s economy.

The inclusion of the capital market toxic assets, he said, was a welcome development that would bring some respite to the economy.

By buying off toxic assets from the balance sheets of banks in exchange for cash and bonds, Alabi said AMCON would help tackle the problem of liquidity squeeze afflicting operators in the industry, which is expected to increase the capacity of banks to advance credit to different sectors of the economy.

He said the banks had pledged to bankroll AMCON to the tune of N1tn, which would be achieved via setting aside 0.3 per cent of their balance sheet size on an annual basis over the life of AMCON.

“This will help to ensure that taxpayers funds are recouped by AMCON,” he pointed.

 

Source: Punch