By Emmanuel Obe, Awka

The Central Bank of Nigeria has said that investors have lost over N100bn to ‘wonder banks’ in the country.

The Deputy Governor, Financial Systems Stability, CBN, Dr. Kingsley Moghalu, disclosed this at a lecture he delivered to mark the sixth edition of the Public Service Lectures Series, organised by the Head of Service of the Anambra State Government in Awka.

Moghalu’s lecture was titled, “Banking Sector Reform: Implications for Governance and the Economy.”

Moghalu, who has responsibility for the regulation of banks and other financial institutions, said, “Wonder banks are a big menace.”

He said, “The wonder banks are a big menace. N100bn was lost by investors in the wonder banks. Unfortunately, they are not within the purview of the CBN. They are under the Securities and Exchange Commission.”

He, however, said that the CBN could not do anything about them because they were not under its purview.

But he said his office had set up a committee, comprising the Securities and Exchange Commission and the Corporate Affairs Commission, to come up with a solution to the menace of the wonder banks.

Finance companies, which are not licensed to operate banking services, but give very high returns on investments are referred to as wonder banks.

The CBN deputy governor said the major problem with the wonder banks was the lack of disclosure and transparency.

He said a number of people, who set up wonder banks, were being prosecuted. “Before investing in them, let them show you their valid licence. And if you have any information on them, report to the Economic and Financial Crimes Commission,” he said.

Moghalu also said the merger and acquisition of the eight banks, recently saved from collapse by the CBN, would be seen through and they would be recapitalised and acquired by new investors.

He lamented the decay in the eight banks, noting that in one particular bank, the chief executive officer registered 100 false companies with which he was siphoning funds from the bank.

He said another bank CEO admitted to having fraudulently diverted $1.2bn from the bank and acquired houses and other assets in foreign countries.

In yet another bank, he said the CEO stole half of the N500bn non-performing loans given out by the bank.

He said the CBN had to inject N620bn into the eight banks to save them and prevent a catastrophic consequence for the Nigerian economy.

“Today, all the depositors’ money in the banks is safe,” he said, adding that the Asset Management Corporation of Nigeria would buy over their non-performing loans and take them off the banks’ balance sheets.

The CBN deputy governor stated further that regional banks were being established to cater for regional banking needs, while other banks would function as national and international banks accordingly.

Moghalu said universal banking, which allowed banks to go into other non-banking endeavours, was abolished so that banks could concentrate on the core functions.

Source: Punch