CBN completes audit of more banks

Nigerian central bank examiners have found some infractions during an audit of 11 more banks but not on the scale of those at the five rescued in a $2.6 billion bailout, a source close to the regulator said on Monday. The central bank injected 400 billion naira ($2.6 billion) into Afribank, Finbank, Intercontinental Bank, Oceanic Bank, and Union Bank on Aug. 14 and sacked their top management, saying they

had become so weakly capitalised they posed a systemic risk.


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Five other banks were given the all clear but central bank examiners have since been auditing a second batch of 11.

“There are infractions here and there, but not on the magnitude that we saw at the five … there is nothing that will warrant similar action,” the source said, asking not to be identified.

The examiners’ report, which is still being compiled, must be considered by senior central bank officials including Governor Lamido Sanusi before its conclusions are made public.

The bailout, the subsequent arrest of banking executives by anti-corruption police and the publication of a list of debtors including some of Nigeria’s biggest corporate names sent shockwaves through sub-Saharan Africa’s second biggest economy.

Between them the five institutions accounted for 40 percent of banking sector credit in Africa’s most populous nation and the executives removed included members of Nigeria’s corporate aristocracy, long seen as almost untouchable.

Sanusi has said the regulator tackled the banks considered to be most at risk first. He told Reuters in an interview last month that it was unlikely that any more bank chief executives would be sacked.

The five institutions accounted for almost 90 percent of exposure to the central bank’s expanded discount window, a facility which allows financial institutions to meet their short term obligations by borrowing central bank funds.

That suggests other Nigerian banks were not facing as serious liquidity concerns as the rescued five, whose aggregate non-performing loans stood at more than 1.14 trillion naira ($7.6 billion), according to the central bank.

Executives from the five banks have been charged with offences ranging from recklessly granting loans and failing to keep proper accounts to share price manipulation and failing to ensure compliance with capital adequacy requirements.

The country’s anti-corruption police have warned additional charges may be brought and that some debtors could be prosecuted as conspirators in obtaining loans under false pretences.

The source gave no indication of the nature of the infractions discovered at any of the 11 banks, but analysts believe the banks identified so far are unlikely to have been the only ones whose share prices were artificially inflated.

Many of Nigeria’s banking stocks were trading at a significant premium to their fundamental value during a stock market bull run in 2007 and early 2008.

The five banks already given an all-clear by the central bank are Diamond Bank, First Bank, United Bank for Africa, Guaranty Trust Bank, and Sterling Bank.

The full probe of all of Nigeria’s 24 banks is expected to be completed this month