Assets Management Corporation of Nigeria (AMCON) Chief Executive Officer, Mustafa Chike-Obi, has given a clean bill of health to Mainstreet Bank. His take is that the Central Bank of Nigeria (CBN) would have known if the rescued bank had breached the rules.
Mainstreet Bank is one of the three nationalised banks that were turned over to AMCON by the CBN and the Nigeria Deposit Insurance Corporation (NDIC) in 2010 following financial distress in the banks the previous year.
Chike-Obi clarified to reporters in Lagos the allegations against Mainstreet Bank and the sinking fund established by the CBN in relation to the N4 trillion AMCON debts. He foreclosed further purchase of toxic assets. Below are more excerpts of the session, at which Assistant Business Editor, KELECHI MGBOJI, was present.
Mustafa Chike Obi
There are allegations that Mainstreet Bank awarded bogus contracts when it is being put up for sale
There will always be allegations against somebody in that position. I am aware of many allegations against me, against some of my executive directors (EDs). We must take these allegations with a sense of responsibility.
AMCON is not a regulator of banks. The regulator of Mainstreet Bank remains the CBN. In any allegation of improper behaviour, the proper first channel is the regulator. Even when allegations are brought to us, we refer them to the CBN. Without knowing the exact allegations you are talking about, it suffices to say that if there is anything serious in the allegations the CBN will take it up. I am not aware about any serious allegations against the bank.
Are the boards of directors of Mainstreet Bank and its subsidiaries operational?
AMCON invested in these banks as an emergency situation with the intention of divesting from them as soon as possible. The CBN has a policy which compels banks to play as bank holding group and as a national bank or regional bank, et cetera. It discourages using depositors’ funds for things like insurance companies and all those subsidiaries that bank created in the past.
Did we want Mainstreet Bank, Enterprise Bank, and Keystone Bank to divest of all those subsidiaries? The answer is yes. But we sought a strong stale situation from the CBN that will leave things as they are until the banks have been divested.
After the divestment, the new owners will decide whether they will keep the subsidiaries with all the structures or sell the subsidiaries and run just the bank. But we thought it was better that, instead of changing what we are selling every day, we leave all those subsidiaries like that. Selling the subsidiaries in isolation, people won’t know what they are buying.
So we are leaving all those structures as they are until they are divested, after which the new owners will decide. So, the answer is yes, because of the sale, we are closing down all those subsidiaries and shortly after the sale you will see what happens.
What is the situation of the recovered private jet for which you once said there was a prospective buyer?
I want to correct the impression that anything AMCON has is public asset. No. There is nothing that AMCON has that was bought with government money. The fact that a public institution owns something does not make it a public asset. You have to also find out how the public institution ended up owing that asset. Assets in custody are not public assets.
AMCON must pay back the bonds it raised. As long as we have borrowed money from the bond market to buy something, it does not make it a public asset.
That aircraft is not a public asset. When AMCON has paid back all the bonds, anything it has could be considered a public asset. So the notion that this is a public asset and there is public interest in it is wrong. Those we should worry about are the banks that are contributing to the sinking fund.
Any of the assets we have, we are obliged when we sell them, to return any excess money above the loan we used to buy the assets. These assets have secured interest on them. They do not belong to us or the public until we have paid our loan.
In any case, we can be sued to court if we want to sell the assets, which is not the case with public assets.
When will Keystone Bank be sold?
We are focused on getting Mainstreet Bank and Enterprise Bank divested. After that is done, we focus on Keystone. Keystone is not in our first process of divestment.
When will sinking funds contributed by banks have legal backing?
It is probably a five-stage process. We have finished with four stages and now we are in the last stage in both the Senate and the House of Representatives. There have been public hearings and I guess the documents are being finalised. I think we are really close to 95 per cent of the process.
AMCON made a rough estimate of N118 billion but declared over N820 billion loss in 2013.
Could you clarify the loss by AMCON?
AMCON does not collect any money from the sinking fund. The banks contribute the fund which the CBN uses to pay the liabilities of AMCON. The money never gets to AMCON.
There is nothing like AMCON in the proposition for trustees. It has nothing to do with the sinking fund, in the collection, spending or management.
But what saddens me when people talk about AMCON’s losses is that the CBN has said we should not buy any more NPL (non performing loans). The Ministry of Finance has said we should not buy any more NPL. And our board of directors has said we should not buy any more NPL. Management is not going to buy any more NPL.
For us to buy any NPL, we have to change the management of all these institutions. Then the CBN has to come up with another pricing formula on how we buy it. That will not happen unless there is a major crisis. So, for all practical purposes, AMCON is not going to buy any more NPL.
The CBN has a rule that any bank that has NPL exceeding 5 per cent of risk assets must reduce it by the next quarter. So, I don’t think we are going to see large scale crisis that necessitates such intervention again.
As for buying power, all we have to do is issue bonds and get the guaranty to do that. But I don’t think that will happen again. I will not be the MD of AMCON when it will buy such NPL again.
What if unethical practice comes back to the system?
I don’t think so. The way you write down an NPL is to check the position or loss. It is not as easy to do as you think. It is acceptable if a bank has a large volume of an NPL and writes it down to zero. You have a problem when you have a bad loan and you don’t write it down.
The CBN also supervises the process and it has examiners, and it is almost impossible today for a bank to escape the examiners’ searchlight. There is no way the examiners will not find out that something is wrong.
Unethical practices can occur but I think we will not have large scale abuses without the CBN or other regulators being aware of it.
Shareholders do not seem to understand where the sinking fund goes as they allege that AMCON collects 0.5 per cent of banks’ profit
I have challenged any shareholder to provide information on any institution that was doing better before AMCON, which is now doing worse because of AMCON. There is not a single one of such institutions.
The banks are the major beneficiaries of AMCON’s intervention. You now have banks like GT Bank and Zenith Bank declaring profits after tax of about N100 billion. It was not heard of before now. There is no bank that is worse off today.
So, when they claim that we take their dividends, it sounds laughable. Without AMCON, they would have no dividends today.
How much dividends did they declare in 2009, 2010, and 2011? All these banks that claim that AMCON is taking their dividends, how much dividends did they declare in 2009, 2010, and 2011? All of a sudden the dividends are coming again.
The government staked huge money to save their institutions and they are now declaring dividends, yet they are complaining that AMCON is taking this or that. Sadly, that is human nature.
The banks and their so called shareholders ought to be thanking AMCON and the government each time they go to their annual general meetings, for without AMCON many of the existing banks would have gone under.
Do you know why former Afribank was bridged? It was because the board of directors couldn’t agree among themselves on how to rebuild it. Quote me. They wrote to the CBN and said please recapitalise the bank. It is in writing. Now they are saying we want our bank back. It is not possible.
I am really not worried about these shareholder groups as you call them. Any time you look at a bank the most important people are the depositors, the employees, then the customers; the last group to take care of are the shareholders.
The depositors and the employees make the money and once you have taken care of them, let the shareholders take care of themselves.