NDIC clarifies liquidation of Fortis Microfinance Bank

…Says safety of depositor’s funds is its primary concern

Motolani Oseni

Following an alleged hasty liquidation of Fortis Micro-Finance Bank (MFB), the Nigeria Deposit Insurance Corporation (NDIC) has clarified that operators in the banking industry are aware that the liquidation of ailing banks is always the last option adopted by the corporation after other cost-effective resolution options have failed. NDIC in a statement signed by its Head, Communications & Public Affairs, Mohammed Kudu Ibrahim, stated that in all instances, the safety of depositor’s funds is the primary concern of the Corporation. The corporation noted that ordinarily, it would have ignored both erroneous claims in a report in the Daily Trust Newspaper, which alleged a hasty liquidation of Fortis Micro-Finance Bank (MFB), stressing that the report relied on statements credited to Mallam Garba Kurfi, Managing Director of APT Securities and Fund to the effect that the CBN and NDIC should have managed the affairs of Fortis MFB rather than embark on its outright liquidation, but for the need to correct the wrong impression which may be created in the minds of the public, thereby undermining public confidence in the banking system. The NDIC noted that the report also stated that managing affairs of the bank, its resale or the appointment of new management would have been better for its depositors and other banks that had a business relationship with Fortis as well as the economy at large. According to NDIC, the report also quoted Mr Boniface Okezie, National Coordinator of Progressive Shareholders Association of Nigeria (PSAN) as expressing the view that instead of regulators aggravating the problems in the financial industry through liquidation, they should devise other means of solving them. He also alleged that Nigerian shareholders, in general, were ultimate victims of the liquidation of banks without any hope of compensation. “It is pertinent to state that both allegations are false and misleading in every material particular. Depositors of banks always come first in the order of settlement of claims in the liquidation process. On the other hand, the shareholders of failed banks are always the last to be paid after the settlement of their depositors and creditors. “It is, however, common knowledge that shareholders are part of the governance structure of the affected banks, through the control they exercise over the Board and Management of their banks during the Annual General Meetings and Extra Ordinary General Meetings, as well as through appointment of Directors and Auditors of their banks.
Accordingly, they cannot be absolved from the misdeeds of their Boards”, the corporation explained. The NDIC further clarified that with particular reference to the liquidation of the Fortis MFB, that it is worthy of note that Fortis MFB was licensed by the Central Bank of Nigeria (CBN) in 2007 and listed on the Nigerian Stock Exchange (NSE). However, in 2018, the shares of the bank was suspended due to failure to submit its 2016 audited accounts. “It should be noted that the various examinations and supervisory interventions of CBN and NDIC revealed that the bank was being run in an unsafe and unsound manner leading to huge non-performing loans, high cost of funds (foreign and domestic borrowings, and fixed/term deposits), exorbitant administrative and personnel costs (especially high emoluments to successive CEOs), and poor corporate governance practices, all of which impacted negatively on its financial condition. As a consequence, the bank was illiquid, could not honour its obligations to its depositors, and became insolvent. “The unhealthy condition of the bank degenerated to the extent that the CBN removed the Management of Fortis MFB Plc in February 2018 and appointed a four (4) person Interim Management Committee (IMC) to take over the control and management of the bank.
The IMC which comprised of officers drawn from the CBN and NDIC, as well as an independent Chairman, were mandated to steer the bank back to sustainability. The IMC managed the affairs of Fortis MFB Plc for a period 10 months during which it did all it could to resuscitate the bank and began reimbursing depositors, using funds advanced by CBN for that purpose”, the corporation further clarified.