FIRST BANK CRISIS: CBN WIELDS THE BIG STICK
The First Bank crisis started with the surprise announcement of the retirement of the Managing Director of the Bank, Mr. Sola Adeduntan, by the former Chairman of the Bank, Ibukun Awosika. In her statement, she said, "We are proud to announce Gbenga Shobo as our new CEO. His appointment has proven the resilience of our succession planning mechanisms and the value we place on our long-standing corporate governance practices, which underpins the institution's enduring sustainability and the 127-year legacy.
"I would like to thank Sola for his dedication and efforts during his helm at the bank, and before as chief finance officer. The Board and I are grateful for his leadership of the bank over the last five years and a half and believe that the strong foundation created during his term would provide an excellent basis for our continued success. We wish him well in his future endeavours outside the FirstBank Group."
This boardroom "coup" led to a strong reaction from the Central Bank of Nigeria, leading to the sacking of the First Bank's Board and reinstating of Sola Adeduntan. However, most people would like to know why the Board chose to hastily sack the Managing Director, Mr. Sola Adeduntan, whose tenure is set to expire in December.
The Central Bank of Nigeria intervened and requested that Sola Adeduntan be reinstated as the Bank's Managing Director because the Board didn't seek the regulatory body's approval before removing him. The CBN Governor at his press conference said, "Ordinarily the Board is vested with the authority to make changes in the management team subject to CBN approval.
However, the CBN considers itself a key stakeholder in management changes involving FBN due to the forbearances and close monitoring by the bank over the last 5 years aimed at stemming the slide in the going concern status of the bank. It was therefore surprising for the CBN to learn through media reports that the Board of directors of FBN, a systemically important bank under regulatory forbearance regime had effected sweeping changes in executive management without engagement and/or prior notice to the regulatory authorities.
The action by the Board of FBN sends a negative signal to the market on the stability of leadership on the Board and management and it is in light of the foregoing that the CBN queried the Board of directors on the unfortunate developments at the bank."
The Governor of the Apex Bank informed the nation that the bank was "in grave financial condition with its capital adequacy ratio (CAR) and non-performing loans ratio (NPL) substantially breaching acceptable prudential standards" in 2016 when the CBN stepped in to stabilize the bank.
Then Governor then stated all the actions the Central bank had taken since that 2016, which include
i. Change of management team under the CBN’s supervision with the appointment of a new Managing Director/ Chief Executive Office in January 2016.
ii. Grant of the regulatory forbearances to enable the bank work out its non-performing loans through provision for write off of at least N150b from its earning for four consecutive years.
iii. Grant of concession to insider borrower to restructure their non-performing credit facilities under very stringent conditions
iv. Renewal of the forbearances on a yearly basis between 2016 and 2020 following thorough monitoring of progress towards exiting from the forbearance measures
The Apex bank's Governor hinted at inside non-performing and poor corporate governance practices. "The insiders who took loans in the bank, with controlling influence on the board of directors, failed to adhere to the terms for the restructuring of their credit facilities which contributed to the poor financial state of the bank. The CBN’s recent target examination as at December 31, 2020 revealed that insider loans
By Wole Akinseloyin