In about eight years of its effort to sanitise the nation’s banking industry, the Central Bank of Nigeria (CBN) has committed over N3 trillion to bail out distressed banks in the country just as the sinking fund established to absorb cost of banking crises in the country has welled up to N931 billion from inception, Daily Sun investigation has shown.
The bailout scheme included the N1.725 trillion spent by the Asset Management Corporation of Nigeria (AMCON) to acquire the non-performing loans of banks in the wake of the global financial crises of 2008–2010.
Commenting on the bail out, the former Managing Director of Unity Bank Plc and Finance Consultant, Rislanudeen Muhammad, said: “specifically bail out funds by the CBN as a prelude to AMCON take over for example was a potent way in which financial stability was restored without a single depositor losing his or her funds.
“It also ensures weak non-performing loan and capital adequacy ratios do not graduate into insolvency. Interventions also ensures financial intermediation capacity of banks is guaranteed. As a one off arrangement, that is very good but if it becomes endemic in a vicious cycle, it could give room for what Economists call ‘Moral hazard’ or a situation where banks simply create bad loans because they know at some time some government organisation will take over and free their balance sheets”, he explained. In 2009, the apex bank had injected N620 billion to rescue 10 banks at the heat of the financial crisis. Another N679 billion was expended by the Asset Management Corporation of Nigeria (AMCON) to recapitalise the three Bridge Banks in August, 2011.
Full story at Sun News Online.
By Omodele Adigun and Uche Usim.
No comments:
Post a Comment