CBN reveals steps taken in 2016 to prevent First Bank from collapse

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The Central Bank of Nigeria (CBN) has outlined steps taken by the apex bank to stabilize First Bank of Nigeria (FBN) Plc and help it navigate out of its grave financial condition in its 2016 financial crises.

This follows the identification of the bank’s problems, which were attributed to bad credit decisions, significant and non-performing insider loans, poor corporate governance practices and the lack of capacity by shareholders of the bank and FBN Holding Plc to recapitalize the bank to minimum requirements.

This disclosure is contained in the press statement issued by the CBN Governor, Godwin Emefiele, on the purported change of management at First Bank of Nigeria, on Thursday.

Emefiele said that the CBN stepped in to stabilize the bank in its quest to maintain financial stability, especially given FBN’s systemic importance.

Some of the regulatory action taken by the CBN include:

  • Change of management team under the CBN’s supervision with the appointment of a new Managing Director/ Chief Executive Officer in January 2016.
  • Grant of the regulatory forbearances to enable the bank to work out its non-performing loans through provision for write off of at least N150b from its earning for four consecutive years.
  • Grant of concession to insider borrower to restructure their non-performing credit facilities under very stringent conditions
  • Renewal of the forbearances on a yearly basis between 2016 and 2020 following thorough monitoring of progress towards exiting from the forbearance measures

According to the statement, Emefiele pointed out that these measures had yielded the expected results as the financial condition of FBN improved progressively between 2016 when forbearance was initially granted to the current financial year.

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Notwithstanding the significant improvement in the bank’s financial condition with the positive trajectory of financial soundness indicators, the insider related facilities remained problematic.

In case you missed it

It can be recalled yesterday, the CBN Governor, Godwin Emefiele announced the sack of the entire board of directors of FBN Holdings Plc and its subsidiary First Bank of Nigeria Ltd. The announcement was made via a television broadcast in the early evening of Thursday, April 29.

Godwin Emefiele cited insider abuse, insider credit and breakdown of corporate governance as the reason behind the sacking of the board of FBN Holdings, Nigeria’s largest bank. The CBN governor further announced the reinstatement of Dr Sola Adeduntan as the Managing Director of the interim Board after he was removed by the now sacked board of First Bank Plc.

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