The new model being adopted by Nigerian banks will go a long way in promoting transparency and the nation’s economy, the Constance Shareholders Association has said.

In its quest to ensure professionalism in the financial sector, the Central Bank of Nigeria had scrapped the universal banking structure, which was introduced in 2004 and, in 2010, directed all bank to divest from non-core banking businesses.

In line with the policy, some banks, including First Bank and Stanbic IBTC, adopted a holding company structure, which was an option under the directive.

For its part, United Bank for Africa, however, chose to, also in line with the directive, divest its non-commercial banking businesses. Under the new structure, the company was split into four standalone companies namely – UBA Plc, UBA Capital Plc, African Prudential Registrars Plc and African Properties Plc.

Commenting on the new structure, the President, Constance Shareholders Association of Nigeria, Mr. Shehu Mikail, said it would not only create value for shareholders, it would also promote transparency, which would in turn boost the economy.

He said, “Basically, the system that these financial houses are introducing actually will create more impact; there will be more avenues for the institutions to improve; with members of staff having to be more creative and provide better services to their customers.”

He, however, stressed that the system, which UBA was introducing, was better than the holding company structure other banks were adopting because the outcome of UBA’s restructuring would be that four companies would be listed on the Nigerian Stock Exchange, rather than one holding company.

“Listing four companies (on the NSE) is going to create more avenues for investors to come in and invest. It will also boost the business activities of those other companies because they will be able to improve their structures and services,”he explained.

Mikail added that, besides attracting investors to the capital market, the new structure would ensure that financial reports would be more detailed, thereby encouraging transparency.

He admitted that by scrapping the universal banking structure, the CBN was indeed promoting professionalism in the industry as the banks would focus on their core business – banking.

Under the universal banking structure, banks had been allowed to engage in non-core banking businesses. Consequently many of them had diversified into areas such as insurance, pension funds management, brokerage firms and mortgage banks, among other interests.

Since the directive, Diamond Bank had divested its interest from ADIC Insurance, while First City Monument Bank had adopted a holding company structure with many others having restructured or in the process of complying with the directive.

Source: Punch (written by Simon Ejembi)