Managers’ incompetence: Investors fault CBN’s fines on banks

  • It’s depleting our investments – Shareholders

Shareholders in the financial market have expressed their displeasure with the fines im- posed on some commercial banks by the Central Bank of Nigeria in the 2015 financial year.
The investors said that rather than sanction banks, the apex regulator ought to have blamed and fined the bank’s chief executive officers for their recklessness in management.
According to them, the board and management of such companies should either have been sacked or made to pay the fines instead of de- pleting shareholders’ funds, as it was in the case of Skye Bank, where the CBN sacked most of the members of its board of directors due to low capi- tal adequacy ratio.
Investigations revealed that the eight commercial banks that were involved paid a total of N3.32 billion to the CBN as fines for several infractions.
The annual reports and accounts of the banks released at the end of the 2015 financial year showed that First City Monument Bank paid a total fine of N177.09 million; Fidelity Bank paid N44.5 million; Guaranty Trust Bank paid N6.05 million while Sterling Bank paid N13 million.
United Bank for Africa paid N2.968 billion; Union Bank paid N46.28 mil- lion, and Wema Bank and Zenith Bank paid N8.087 million and N60.1 million respectively.
Having defaulted on the Septem- ber 15 deadline, one of the three banks sanctioned by the apex bank, UBA, paid N2.946 billion for failing to fully remit funds to the TSA within the deadline.
The bank also paid N6.8 million for failing to capture the details of some depositors and N6 million for late up- date of customers’ files and reporting offshore subsidiaries.
FCMB was fined another N126 mil- lion for its failure to carry out due dili- gence and non-rendition of suspicious transactions report done by some of its customer. It was also fined N25 million for foreign exchange sales in- fractions to Bureau de Change firms, among eight other infractions.
In 2015, Zenith Bank was fined for nine infractions, the largest being N32 million as penalty for not remitting public sector deposit to the TSA. It was also fined N10 million for fraud- ulently transferring money from an account in Enterprise Bank to Valluci Properties Limited.
Union Bank had committed eight infractions, with the largest fine it paid being N18 million as penalty in respect of public sector funds and N14 million for non-compliance with CBN guidelines for appointments of staff to top management positions.
GTB, on its part, was fined for de- lay in transmitting list of TSA names to the CBN, late rendition of returns and contravention of the apex bank’s circular on prior clearance of prospec- tive employees of banks.

Uba Group

However, a cross-section of share- holders of the banks that spoke with The Point, insisted that the manage- ment of the banks should bear the cost of their negligence and not the shareholders.
The National Coordinator, Inde- pendent Shareholders Association of Nigeria, Mr. Sunny Nwosu, expressed concerns over the amount paid by the banks for committing various infrac- tions in 2015.
The investor, who said the mon- ies paid would have yielded higher dividends for shareholders, implored banks to be very careful and avoid wastage of shareholders’ funds. “If we have a very punitive regulator, we should learn how to manage them,” he said.
On his part, the President, Pro- gressive Shareholders Association of Nigeria, Mr. Boniface Okezie, said CBN’s punitive stance was killing the banks with fines and various regula- tory headwinds.
He said that some of the penalties would have been handled adminis- tratively as against the depletion of shareholders and banks operational funds.
Okezie implored the CBN to tem- per justice with mercy and allow banks to thrive and give investors’ value for their investments.

However, contrary to the allega- tions of over-burdening the institu- tions, a top source in the apex bank explained that the violation of the rules and sanctions meted against the defaulters, were in line with the Banks and Other Financial Institutions Act.
But in a reaction, Acting Director, Corporate Communications, CBN, Mr. Isaac Okoroafor, told The Point that what the apex bank expected from shareholders, was to punish the management of the banks for breach of regulatory rules.
“We cannot allow banks to abuse the system and cause systemic crisis just because shareholders want divi- dends,” he said.