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Central Bank yet to approve investors for rescued banks

By on March 29, 2011

The Central Bank of Nigeria (CBN) has said that so far, it is has not granted any approval for any bank to sign Memorandum of Understanding (MoU).

The regulator, in a statement by its spokesperson, Mohammed Abdullahi, expressed displeasure over speculations and comments on the proposed mergers and acquisitions of rescued banks.

The clarification is coming just as Access Bank and Intercontinental Bank announced the signing of an MoU at the weekend.

While welcoming the trend of ongoing negotiations among various parties and some rescued banks, the CBN stated that MOUs can only lead to actual transaction if and when CBN issues no objection and other regulatory approvals.

“The CBN and other regulators will ensure that all relevant factors, including professional advice from the financial advisers, are adequately considered before any approval is granted,” the statement added.

Apex bank not involved

The CBN rebuttal may not be unconnected to insinuations that the regulator is influencing the whole procedure in favour of some interested parties.

“The process, which is being driven by the parties involved and not the CBN, will have to be approved by the board and shareholders of the banks concerned. Therefore, all speculations and unsavoury comments on the process are premature and unnecessary,” the Central Bank stated.

Intercontinental Bank became the third rescued financial institution to make significant progress in the search of a new core investor, with the signing of a “business combination” agreement with Access Bank.

A joint statement by both institutions at the weekend stated that the two have signed a MOU for the purpose of “business combination that would create one of Africa’s largest financial institutions.”

The agreement, which puts to rest several weeks of speculation, follows the completion of a competitive, rigorous, and transparent selection process and the approval of the board of directors of both banks.

Milestones will be reached

Sunday Ekwochi, company secretary of Access Bank, said the details of the merger, which could take as much as 24 months, was still being worked out.

“During this period, milestones will be reached and as we go along, we will unfold the details. The MoU is an indication that both parties are prepared to work together,” he said on telephone, when asked about the amount and the equity stake that is involved in the transaction.

Last week, Union Bank announced a memorandum of agreement with Africa Capital Alliance for the injection of over N112 billion ($750 million) into the rescued 94-year old financial institution. It said the deal, with its new core investor, would provide a framework for the process by which the bank will be recapitalised.

“However, the entire process will be subject to the approval of the bank’s shareholders, the Central Bank of Nigeria (CBN), the Securities and Exchange Commission, the Nigerian Stock Exchange, and the Federal High Court,” it said in a statement.

Afribank, another rescued bank, a fortnight ago announced the emergence of Vine Capital as its new preferred core investor with which it is still negotiating. The other rescued banks, Oceanic Bank, Bank PHB, Spring Bank, Finbank, and Equitorial Trust Bank are yet to announce appreciable success.

Aggrieved shareholders of Bank PHB last week secured a court injunction against the planned sale of the bank to Habib Bank of Pakistan.

In all, the CBN said it and other relevant regulators will be guided by appropriate considerations including due diligence on investors and the advice provided by financial advisers to the parties before approving MOUs and other subsequent transactions.

Source : 234next