WHAT LIES BENEATH THE BANKING DRAMA

 Awaal Gata urges the CBN to uphold fairness, transparency, and due process in the banking sector

The recent decision by the Central Bank of Nigeria (CBN) to dissolve the Boards and Management of Union Bank, Keystone Bank, and Polaris Bank has ignited widespread discussions across the nation. This move has not only attracted attention but has also divided public opinion, with the public interpreting the decision in different ways and speculating about the political and clandestine maneuvers that may have influenced it. In various circles, there is growing unease regarding the integrity and transparency of this regulatory intervention, as it faces allegations of being a witch-hunt or serving the interests of specific parties. This situation raises legitimate concerns about the accountability and openness of such actions, prompting a closer examination of the motives behind the CBN’s decision.

The CBN justified its intervention by citing corporate governance lapses and regulatory non-compliance as reasons. However, these allegations stand largely unsubstantiated due to the hurried nature and absence of a fair hearing underlying their actions to penalize the banks. This swift and seemingly arbitrary approach creates a vacuum of uncertainty, fostering doubt and speculation. The inadequacy of proper justification prompts questioning of the fairness and adherence to due process by the CBN in reaching this consequential decision.

The doubt surrounding the noble intentions of the board’s removal is further amplified by the communication method. The lack of a written notice from the CBN to the boards before this unilateral action is a clear violation of the principles of fair hearing and natural justice. The absence of proper communication raises questions about the transparency and adherence to established legal procedures. It’s worth noting that whatever legal basis the apex bank relied on to execute these actions should not supersede Section 36 of the Nigerian Constitution, which unequivocally guarantees fair hearing for all. This discrepancy underscores the need for scrutiny and clarification regarding the legal grounds supporting the CBN’s decisions.

The affected banks contend that, in accordance with legal requirements, any examination report should have been shared with them, outlining regulatory concerns and proposing necessary actions. Regrettably, the CBN deviated from this protocol, thereby violating its own laws, regulations, and established practices. This departure raises concerns about procedural fairness and transparency, as the banks were deprived of essential information crucial for addressing and rectifying regulatory issues. The failure to adhere to standard procedures underscores the need for a comprehensive examination of the CBN’s actions and their alignment with legal frameworks.

The absence of shareholder involvement in discussions and the CBN’s failure to issue a formal letter outlining the basis of the intervention are significant. Shareholders learned of the decision through newspapers and social media, bypassing the established channels. This lack of direct communication undermines the principles of transparency and engagement, leaving stakeholders uninformed and disconnected from crucial decisions affecting their interests. The need for clear and direct communication channels is evident, highlighting the importance of upholding principles that foster openness and meaningful engagement in such consequential matters.

Shareholders rightfully express concern over the violation of fair hearing provisions in the Banks and Other Financial Institutions Act 2020. The CBN’s invocation of Section 12 of BOFIA gives the impression of a predetermined decision to revoke licenses without engaging shareholders in a meaningful dialogue regarding the alleged non-compliance. This raises serious questions about the due process followed, emphasizing the need for a thorough examination of the CBN’s actions to ensure adherence to legal frameworks and principles of fairness in regulatory interventions.

While facing allegations of non-payment and connections to prominent public officials, avenues for fact-checking such narratives exist. Keystone and Polaris Banks’ acquisitions from CBN and AMCON were carried out by local investors through documented processes. Additionally, Union Bank’s acquisition by foreign investors had records available, with major acquisitions approved by the CBN. These established processes and documented transactions provide avenues for verification, emphasizing the importance of relying on accurate information when assessing the circumstances surrounding these banks.

CBN must steer clear of utilizing unsubstantiated allegations to seize the banks from investors to avoid accusations of unjust regulatory actions. Such actions could have severe consequences for both local and foreign investors, potentially impeding Nigeria’s ability to attract foreign investments. Upholding transparency and adhering to due process is crucial in maintaining a favorable investment climate and fostering trust in the regulatory environment.

The midweek regulatory action triggered a run on the banks, eroding public confidence and impacting communities where these banks serve as primary service providers. If such actions are deemed necessary, historical practices, often executed on a Friday, could be more prudent. This timing allows for more controlled responses, minimizing disruptions to both the banking sector and the communities reliant on these institutions for essential services.

The abrupt nature of CBN’s action raises concerns about potential ulterior motives and political influences, especially considering the associations of the banks with specific sections of Nigeria. This perception could jeopardize the constitutional rights of shareholders and erode public trust in the financial system. This trust is pivotal for economic growth, deposit mobilization, loan extension to MSMEs, and the overall prudential performance of the financial sector. Preserving transparency and avoiding any perception of political influence is crucial to maintaining the stability and effectiveness of the financial system.

As Nigerians eagerly await answers from the CBN, the apex bank must step out of the shadows and engage with shareholders, as mandated by law. This collaborative approach is essential to collectively address regulatory concerns and mitigate collateral damage. There is still an opportunity for the CBN to uphold fairness, transparency, and due process in the banking sector. Doing so would not only restore confidence in the apex bank but also avert potential long-term consequences for all parties involved. It’s a crucial moment to prioritize open communication and adherence to legal principles for the benefit of the financial sector and the broader economy.