Recapitalisation hurdle threatens Savannah Bank’s reopening

The failure of the core investors in Savannah Bank of Nigeria Plc to fully recapitalise the bank to the N25bn minimum share capital requirement is a major reason for its inability to reopen for business, more than three years after its operating licence was returned via a court order, investigations by our correspondent have revealed.

The Central Bank of Nigeria had closed down SBN in 2002, citing infringements and non-compliance with banking laws by the management of the bank as reasons for its action.

However, after a protracted legal battle, the Court of Appeal sitting in Abuja and presided over by Justice U. M. Abba’aji, on February 5, 2009, ordered that the operating licence of the bank be reinstated. The court had subsequently given the bank six months to capitalise.

Under the new banking regime, the minimum recapitalisation requirement for international banking, as stipulated by the CBN, is N50bn, while N25bn is for national banks and N10bn for regional banks.

Reports indicate that SBN intends to resume operation as a national bank, but has been unable to raise the required N25bn and resolve other operational issues.

The Nigerian Deposit Insurance Corporation and CBN confirmed that Societe Generale Bank, which also regained its operational licence in 2009 through a court order, having had it revoked in 2005, would reopen as a regional bank under a new name, Heritage Bank.

In December 2012, the CBN confirmed that it would give loans to both SBN and Societe Generale Bank of Nigeria to enable them recommence operations.

The Director, Banking Supervision, CBN, Mrs. Tokunbo Martins, had said the two banks would only get loans from the central bank upon the fulfilment of certain conditions, including satisfactory risk management framework, evidence of good corporate governance and meeting the minimum recapitalisation requirement.

Commenting on the failure of the banks to have reopened for business, the Director, Corporate Communications, CBN, Mr. Ugo Okoroafor, said in a telephone interview with our correspondent on Wednesday that the bank would only assist SBN if it met set conditions.

“It was a court decision that Savannah Bank should be given its licence back. We are ready to assist the bank, but it is up to the owners to come up with a timeline to reopen,” he said.

Asked whether there was a timeframe for the bank to reopen and what possible sanctions were open to the regulatory bank to adopt in view if SBN failed to reopen for business, Okoroafor said the circumstance was “peculiar.”

He said, “This is a bank that was operating and had its licence revoked; and then, they went to court and the court reinstated it. The court did not say it is reinstated for a specific period.

“About whether we will revoke the licence after a while; like I said, they got it through a court order. So, if, for instance, anything like that is going to happen, when we get to that bridge we will cross it; they are not taking fresh deposits, there is no systemic risk. All those things have been minimised. We will have to watch and see and the take a decision as it comes.”

 “The point is that when they are ready, they will reopen. When they meet our condition, we will help them; we will help them as they come forward,” he added.

Okoroafor explained that as far as the CBN was concerned, the bank had not started operations; “We haven’t renewed the licence; when they meet the conditions we will do that, but we are ready to assist them.”

He added, “If it, for instance, is a bank that is in operation and collecting deposits from people and then falls short of certain conditions, you can then say, ‘if you don’t meet those conditions, we will do this and do that.’

“The true situation is that the bank is moving ahead to reopen and we are hoping that it will reopen shortly.”

In the period following the court order, Savannah Bank had made several promises to reopen. For instance, in July 2010, its Executive Director (Services), Mrs. Pat Nwobodo, had informed the management of NDIC that the bank had concluded arrangements to open six offices in each of the geo-political zones of the country to facilitate depositor interaction and verification of claims.