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CBN Sacks Boards of Union, Titan, Keystone, Polaris Banks

The Central Bank of Nigeria has, with immediate effect, sacked the entire Board of Directors of Polaris, Titan, Union and Keystone Banks.


This action, according to a press release signed by Mrs. Hakama Sidi-Ali, Acting Director, Corporate Communications, was necessitated by the “non-compliance of these banks and their respective boards with the provisions of Section 12(c), (f), (g), (h) of Banks and Other Financial Institutions Act, 2020.”


The press release further details the banks’ infractions, stating they range from “regulatory non-compliance, corporate governance failure, disregarding the conditions under which their licenses were granted, and involvement in activities that pose a threat to financial stability, among others.”


The specific details of the banks’ non-compliance remain unclear, but the potential implications are concerning. Regulatory non-compliance could involve issues like capital adequacy ratios, loan-to-deposit ratios, or risk management practices falling below regulatory standards.


Corporate governance failures could encompass mismanagement of funds, conflicts of interest, or lack of transparency. Disregarding licensing conditions could involve exceeding authorized activities or operating outside permitted geographical areas. And involvement in activities that pose a threat to financial stability could encompass anything from reckless lending practices to money laundering or even outright fraud.

Provisions of Section 12(c), (f), (g), and (h) of the Banks and Other Financial Institutions Act, 2020
Section 12(c). Prohibits directors, managers, and officers of banks from having personal interest in any advance, loan, or credit facility granted by the bank. They must declare any such interest to the bank. Additionally, they are prohibited from granting loans or credit facilities without authorization and proper security as per the bank’s rules and regulations. Violating this section is an offense punishable by a fine of ₦100,000 or imprisonment for 3 years, and any gains or benefits gained through such contravention will be forfeited to the Federal Government.


Section 12(f): Requires banks to comply with all applicable laws, regulations, and directives issued by the CBN. Failure to comply with this section can result in regulatory sanctions, including fines, limitations on operations, or even revocation of the bank’s license.


Section 12(g): Sets restrictions on the types of investments banks can make. It allows them to invest in: Government securities with maturity not exceeding 25 years and publicly offered for sale. Securities of the Federal Government on behalf of internal funds like staff pension funds. Foreign currencies and bills of exchange maturing within 184 days. Securities of freely convertible governments or international financial institutions of which Nigeria is a member. Redeemable bonds for regularizing currency exchange exercises. Exceeding these investment limits without proper authorization could be considered non-compliance.


Section 12(h): Empowers the CBN to issue additional directives to banks as it deems necessary for the purposes of the Act. Disregarding any such directives issued by the CBN could also be considered a violation of Section 12(f).


An official of the CBN who spoke to the Newsmen about the development said, “these are serious accusations, and the CBN’s swift response demonstrates its commitment to maintaining a safe, sound, and robust financial system in Nigeria”.


“The CBN’s action sends a strong message to all financial institutions in Nigeria that it will not tolerate any behavior that jeopardizes the integrity and stability of the financial system. This is particularly important in the current economic climate, where Nigeria, like many other countries, is facing significant headwinds due to global factors and domestic challenges” he said.


He added that “a strong and stable financial system is essential for weathering these storms and supporting economic growth, and the CBN’s decisive action shows it is committed to protecting Nigerians’ financial security”.


The press release also assured the public of the safety and security of depositors’ funds and vowed to “take all necessary steps to ensure that depositors of Union Bank, Keystone Bank, and Polaris Bank are not left worse off due to these events”.


“In the coming days and weeks, we can expect more information to emerge about the specific reasons for the CBN’s action and the steps it will take to ensure a smooth transition for the affected banks” the CBN official said.


These developments followed a report submitted to President Bola Tinubu by the Special Investigator on the Central Bank of Nigeria (CBN) and Related Entities, Jim Obazee. The report raised concerns about the acquisition of Union Bank of Nigeria by Titan Trust Bank (TTB) and implicated individuals such as Mr. Tunde Lemo, Mr. Cornelius Vink, and Rahul Savara. The report recommended that the Nigerian government take over the banks due to the inability of the shareholders to prove the legitimacy of their ownership.


In response, Mr. Lemo rejected the accusations and requested seven days to provide the necessary documents to prove ownership. Failure to do so, according to Lemo, would result in the forfeit of Titan Trust Bank and Union Bank of Nigeria to the Federal Government.


The dissolution of the Boards and Managements of Union Bank, Keystone Bank, and Polaris Bank marks an important step by the CBN towards maintaining a sound and secure financial system in Nigeria. The details regarding the banks’ non-compliance and the subsequent actions taken to ensure a smooth transition will be closely watched in the coming weeks.

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