Minister of Finance, Zainab Ahmed, was on target recently when she ordered regulators to identify and sanction individuals that ran Skye Bank Plc aground. This is reassuring news, as many were confounded when, in announcing the withdrawal of its operating licence and replacement with a bridge bank last month, the Central Bank of Nigeria was silent on the issue of retribution for those who crashed the institution. The continued treatment of financial malefactors with kid gloves is deplorable. To safeguard the financial system and deter abuse of the laws, regulators and law enforcement agencies should apply the full weight of the law against those who commit financial crimes and threaten the financial system.
To be clear, a bank, like any other for-profit enterprise, can fail for reasons as diverse as poor management, adverse operating conditions and corporate infighting. However, when directors, shareholders, executives and other employees break laws and rules that border on crime, it is the responsibility of the regulators to interdict them, recover ill-gotten assets and prosecute them in accordance with the existing laws. There is adequate information out there and bold hints by officials, which suggest that shenanigans likely played a role in tipping the bank over the brink.
Unlike the hesitancy of the CBN and its Governor, Godwin Emefiele, Ahmed was sure of what should follow in line with global best practices: she instructed the Nigerian Deposit Insurance Corporation to be thorough in its ongoing investigation into the bank’s collapse, adding, “We are going to hold whoever was responsible for the failure of the bank.” She resolved rightly that perpetrators should no longer be allowed to walk away scot-free after taxpayers’ funds are deployed to save tottering banks, while shareholders lose their investments and high net worth individuals, their savings.
The CBN has not demonstrated the iron resolve lately, or the zero-tolerance it exhibited when it moved decisively in 2009 to rescue eight stressed banks, sacked their boards and managements and handed over those who broke the law to relevant agencies for prosecution. Emefiele also set up Polaris Bank as a bridge institution, retaining its interim management, which it had appointed in July 2016 when it sacked its chairman, Tunde Ayeni, its managing director, Timothy Oguntayo, and three others. The bank reportedly recorded negative N2.2 trillion in the balance sheet in over three years despite an asset position of about N1.4 trillion by December 2014. Apart from foolhardy decisions like the acquisition of the nationalised Mainstreet Bank in 2014 for N126 billion when, according to analysts, the asset was not worth more than N59 billion, murky dealings were alleged to have thrived.
Crucially, the bank was reportedly suffering as a result of insider abuse, the ailment that nearly crashed the financial system and prompted new rules and harsher penalties for corrupt executives. Since the global financial crisis of 2007/8, regulators around the world have turned out new rules to tackle executives who live out the famous line of American author, William Kurt Black, that “the best way to rob a bank is to own one.” Apart from the failure to meet critical thresholds like cash reserve ratio, non-performing loans and capital adequacy, companies related to some major shareholders were alleged to be over-exposed to the bank in breach of corporate governance rules.
Since he publicly complained in 2017 of widespread insider abuse and vowed to bring perpetrators to book, Emefiele has not been seen to match his words with action. His predecessor, Lamido Sanusi, was not so sparing. Bank executives were prosecuted and some convicted. While Emefiele can rightly plead that the first priority is to protect depositors’ funds and the financial system by following the template of the bridge bank and injection of N786 billion, those who broke extant laws should, as Ahmed also rightly noted, be punished severely and every illegally-acquired asset recovered from them.
In response to the crisis triggered by the first bank run in the country since 1866, the United Kingdom’s new Banking Act 2009 set out to protect the system, instil confidence and protect depositors. But it went further to charge 28 persons to court, with five convicted and 15 cases still in court by 2017, according to a report by Channel 4, a broadcaster. The United States government and regulators were more intolerant of errant bankers: in 2014, it filed suits against 16 global banks and by 2015, 80 banks had finalised criminal settlements with US prosecutors. Some 402 individuals indicted in wrongdoings in financial institutions were arraigned on criminal charges: 97 bankers among them were charged with fraud. Three hundred and twenty-four persons were eventually convicted and 222 sent to prison.
Iceland also responded to insider misbehaviour by appointing a Special Prosecutor and by 2016, 29 senior bankers had been jailed. Ireland’s courts jailed David Drumm, a former CEO of the failed Anglo-Irish Bank, for fraud and false accounting.
Those who abuse their positions as directors and executives of financial institutions here should similarly be brought to justice. There should be no sacred cows.
