Four Banks on the Spot over CBN Audit SSS quizzes ETB MD, seizes passports of Bank PHB directors

Indications emerged yesterday that four out of the 11 banks whose accounts were recently audited by the Central Bank of Nigeria may have more questions to answer ahead of the CBN Committee of Governors' meeting, which holds next week to take the final decision on the report of the special examinations ordered by the apex bank. The affected banks are believed to be Spring Bank Plc, Bank PHB Plc, Equitorial Trust Bank and Wema Bank Plc. Ripples from the outcome of the CBN examination are already being felt in banking circles as the State Security Service on Thursday quizzed the Managing Director of Equitorial Trust Bank, Ike Oraekwuotu, and seized the international passport of Managing Director of Bank PHB as well as those of the bank's four executive directors. The move by the security agency is believed to be a pre-emptive measure not unconnected with the ongoing banking reforms. The 11 banks, whose recent audits have been completed by the CBN are Skye, Bank PHB, Ecobank Nigeria Plc, Zenith Bank Plc, First City Monument Bank Plc, Fidelity Bank Plc, Spring Bank Plc, Access Bank Plc, Wema Bank Plc, Unity Bank Plc, and ETB. THISDAY gathered that on completion of the audit of the second batch of the 24 banks in the country, four of them namely - Spring Bank Plc, Bank PHB Plc, Equitorial Trust Bank and Wema Bank Plc were said to have failed in some of the parameters set by the CBN. The general parameters upon which the examination of the banks' records was based include capital adequacy, liquidity, solvency and corporate governance. THISDAY gathered that based on the advice of the CBN solicitors, due process was followed during the audit process as the respective chief executive officers of the affected banks were allowed to go through reports arising from the audit and make adequate responses to them. Sources however said the responses of the bank CEOs have not been able to change the course of the decisions by the CBN. However, the CBN may have decided to change gear in handling the situation in the affected four banks. Unlike the method it adopted on August 14 when it specifically removed the CEOs and executive directors of the five banks affected in the first batch of the audit, the apex bank may have decided to let the board of directors of the four banks found wanting in the latest audit to implement the tough decisions necessary to put the banks in order. The banks' boards will be mandated to carry out certain measures to be dictated by CBN in accordance with the Banks and Other Financial Institutions Act (BOFIA) and the CBN Act. For example, THISDAY gathered that Wema Bank, which was acquired by SW8 Investment Limited about four months ago - with a new management led by Segun Oloketuyi, would be allowed to continue operations but will be closely monitored by the CBN. The bank may be given more time to raise funds to shore up its capital base. When the new Wema Bank management moved in, it promised to inject more funds over a period of time. But the management was said to be having challenges raising funds both locally and internationally as a result of the downturn in the stock market and dearth of funds at the international market that had been ravaged by the global meltdown respectively. In the case of Bank PHB, whose MD, Francis Atuche held two meetings with the CBN in Abuja in the last two weeks, it was alleged that the loan loss provisioning may be impacting on its solvency. However the bank is making spirited moves to persuade CBN to the contrary and to indicate that most of its loans are now performing. This development was said to have prompted Bank PHB to hold a board meeting last Thursday, where all these issues were tabled. Bank PHB was said to have gotten its hands burnt through the acquisition of Spring Bank Plc, which was said to have had a couple of holes in its books. This, among other issues that rocked the bank some months ago, led to the sack of two of its Executive Directors. Contacted last night, a top official of the bank, who confirmed the seizure of the international passports of Atuche and his EDs, however, insisted that Bank PHB successfully responded to most of the issues raised by the CBN and as such does not have to raise more capital. As for ETB, the situation remains unclear but the Managing Director was interrogated by the SSS?last Thursday. An official of ETB who spoke with THISDAY last night also confirmed the interrogation of the CEO by the SSS last Thursday. Spring Bank, which was acquired by Bank PHB, was also said to be having some challenges. Meanwhile, the officials of Bank PHB, which had their passports seized by the SSS are its Managing Director, Francis Atuche; Executive Director, North Bank, West, Central and East Africa, Ahmed Kuru; Executive Director, Lagos Directorate, Julius Okotako; Executive Director, South Directorate, I. G. Ukpaka, and Executive Director, Service Bank, Eddy Ogboru. THISDAY gathered that the seizure by the agency was based on instructions from the SSS head office in Abuja and that managements of the two banks are being placed under close watch pending the time the results of the audit of the 14 banks are announced by the CBN. THISDAY gathered that any of the bank executive whose passports were seized would have to apply to the CBN for clearance before they could travel out of the country. The CBN had a few weeks ago, insisted that there would be no surprises in the audit of the second batch of banks to warrant major systemic shifts like the removal of bank chief executive officers. But current unfolding events may however prove otherwise. The examination of the 11 banks was conducted by a joint team of CBN and the National Deposit Insurance Corporation (NDIC). Shortly after his appointment as CBN Governor last June, CBN governor, Mallam Lamido Sanusi, had ordered the special examination of all commercial banks in the country to determine their level of exposure to margin loans and the oil and gas sector in a bid to determine their solvency and capacity to continue as going concerns. The CBN had initially restricted its examination to 11 banks because the other three - Standard Chartered Bank, Citibank and Stanbic IBTC - are foreign banks, and it does not anticipate that their exposure to non-performing loans will have any significant impact on the market. Speaking at an interactive session with the capital market community on the floor of the Nigerian Stock Exchange (NSE) last Wednesday, Sanusi said the audit of the remaining three (Stanbic Chartered, Stanbic IBTC, and Citibank) began last Wednesday. "Each bank was examined by 10 examiners, five from CBN, and five from the Nigerian Deposit Insurance Corporation (NDIC). I have not finished looking at the reports," Lamido added. He said the results of the audit would be made public early next month.