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Thursday, March 23, 2023

Voice of the Nation

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CBN TO WITHDRAW LICENSE OF BANKS WITH ERRANT SHAREHOLDERS

23rd March 2023

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CBN Governor Godwin Emefiele



•Says financial institutions belong to depositors

By Chinwendu Obienyi

 



The Central Bank of Nigeria (CBN) has stated that it will not hesitate to
withdraw the license of any bank found guilty of having errant shareholders.

Its Governor, Godwin Emefiele, made this known to newsmen during the 290th
Monetary Policy Committee (MPC) meeting which held in Abuja, recently.



Emefiele whilst revealing that the apex bank has put in place some prudential
guidelines to insulate Nigerian banks from any shock, added that even when banks
have been taken over by the CBN, it has made necessary steps to ensure
depositors do not lose their money.

“What we saw in the aftermath of the SVB programme in the U.S is that the
government came out to tell all depositors of SVB or the other banks that they
will be paid all their monies notwithstanding the fact that what is secured or
guaranteed is $250,000. This is something even in Nigeria that we have been
doing on our own either as a result of certain prudential guidelines by the CBN
or as a result of collaboration between the CBN and the banks. We have made sure
that even banks are taken over by the CBN that the shareholders may lose their
investments but no depositor as far as I know since 2008 has lost his or her
deposit in the Nigerian banking industry today”, he said.


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According to Emefiele, the reason is because the CBN from its own standpoint has
insisted that shareholders seem to be less important than depositors.

“In fact we have gotten to a realm where we are beginning to see that banks are
owned by depositors, not by shareholders because if you look at the balance
sheet of an average 5-year old bank today, the size of depositors funds is at
least close to between 7-10 times that of shareholders’ funds and that is why we
come out very strongly when we find shareholders misbehaving in banks, we do not
spare them because we will continue to repeat that the banking license is a
privilege and not a right”, Emefiele said.

The CBN governor further added that due to the fact that a banking license is
the property of the apex bank, it will not hesitate to withdraw any bank’s
license once it finds out that the bank’s shareholders are misbehaving.



“This is a policy that the CBN has held on to even before I became the CBN
Governor and I know that even now and after my tenure, whoever will be the CBN
governor will insist that shareholders cannot continue to have the kind of
rights they think they have to run a bank anyhow and make depositors lose their
deposits. We will rather dispense with the shareholders and make sure that
depositors do not lose their deposit”, he said.

He thereafter revealed that the apex bank is holding about N14 trillion in cash
reserves deposits from banks, stating that this is good liquidity that is meant
to actually act as insulation just in case of problems.

“Also on Loan-to-Deposit Ratio (LDR), the banks today are on 52 per cent which
means they are not over-trading but are diversifying their portfolios to ensure
that they have ample liquidity or zeal risk investments on securities where they
make money but at the same time depositors’ funds remain protected”, Emefiele
said.

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