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First bank gets a refresh from Central Bank of Nigeria

CBN sacks ALL directors of First Bank Holdings, reinstates Sola Adeduntan as MD

The Central Bank of Nigeria has dissolved the board of director in both First Bank and First Bank Holdings. The announcement was made known in a press release by Mr Godwin Emefiele, the CBN governor, a day after the bank's board named a new managing director.

The CBN was surprised by the move of the board directors to appoint a new managing director. According to the CBN, they learnt about the removal through the media.

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. CBN Governor, Godwin Emefiele during a press release
CBN Governor-Godwin Emefiele|Source:THISDAYLIFE

According to the press release by the CBN Governor, First bank was in grave financial condition with its capital adequacy ratio (CAR) and non-performing loans ratio (NPL) substantially breaching acceptable prudential standards since 2016. The problems at the bank were attributed to bad credit decisions, significant and non-performing insider loans and poor corporate governance practices.

The CBN said it stepped in to stabilize the bank in its quest to maintain financial stability, given FBN's systemic importance. CBN's intervention in the bank yielded the expected results as the financial condition of FBN improved progressively between 2016 when the forbearance was initially granted to the current financial year.

Despite the significant improvement in the bank's financial condition with positive trajectory of financial soundness indicators, the insider related facilities remained problematic.

"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 were materially non-compliant with restructure terms (e.g. non perfection of lien on shares/collateral arrangements) for over 3 years despite several regulatory reminders. The bank has not also divested its non-permissible holdings in non-financial entities in line with regulatory directives."  CBN Governor, Godwin Emefiele during a press release

In a bid to preserve the stability of First bank and protect minority shareholders and depositors, the CBN approved the immediate removal of all FBN Ltd and FBN Holdings Plc directors. Also, the apex bank appointed new directors in FBN Ltd and FBN Holdings Plc.

Newly appointed directors|Source:Inclusion Times

Mr Godwin Emefiele concluded in his press report that the apex bank is reassuring depositors, creditors, and other stakeholders of First bank of its commitment to ensuring the financial system's stability. There is, therefore, no cause for panic amongst the banking public, given that the actions being taken are meant to strengthen the bank and position it as a banking industry giant.

Nigeria in focus

Population: 200,963,599 in 2019 compared to South Africa's 58,588,267

GDP: $448.12 billion in 2019 compared to South Africa's $351.432 billion

GDP per capita: $2,229 in 2019 compared to South Africa's $6,001