IT was not surprising that the Court of Appeal upheld the ruling of the Federal High Court affirming the powers of the Central Bank Governor to sack and replace directors of any bank in a grave situation. The governor can also select any person to advise such a bank on the proper conduct of its business. In view of the clear provisions of the Banks and Other Financial Institutions Act (BOFIA) regarding any bank on the brink of failing, it is remarkable that adjudication upon the suit up to this stage had lingered for over one year.Bank promoters must obtain a licence from the Central Bank Governor to commence banking operations. Conditions for granting the licence include submission for scrutiny and approval by the Central Bank of the names and relevant details of the proposed directors and other principal officers. Also subject to prior vetting and approval by the apex bank are the memorandum and articles of association of the planned bank. To retain the licence and continue in banking business, the directors and principal officers must at all times comply with the conditions and guidelines set by the Central Bank.As prescribed by BOFIA, whenever a bank slips into a grave situation, its principal officers could be removed by the Central Bank governor and anyone so affected cannot seek protection under 'anything in any written law or any limitations contained in the memorandum and articles of association of that bank.' It would be merely academic to attempt to clutch at the provision requiring the apex bank to notify the affected bank or officers to be removed of its intention, so as to give them the opportunity of making possible representations, because the CBN may dispense with such niceties if it considers that any delay would be detrimental to the interest of the bank, its depositors, creditors or the public generally. In anticipation of lawsuits by culpable directors and principal officers of any failing bank, section 49(1) of BOFIA antidotally protects the Federal Government, the Central Bank, their officers and appointees against all adverse claims.Nonetheless, the CBN is mandated to maintain all-round financial sector good health through sound regulation and strict supervision of financial sector operations. The apex bank possesses all necessary powers to nip in the bud all fraudulent transactions and to keep to the barest minimum activities that could impair bank shareholders' funds. The CBN, however, does not enjoy any protection against dereliction of its duties just as any attempt by bank operators to capitalise on such a vacuum to violate financial sector best practices are not condonable. The outcome of the court action, therefore, gives rise to at least two critical issues.First, the lawsuit concerned directors removed from just one out of five banks that were given the same treatment. In fact, in the 2009 financial year, instead of five banks, 10 out of the 24 existing banks failed the audit test carried out by auditors who were not regular staff members of the apex bank. In that year, total volume of bank toxic assets or non-performing loans represented 28 per cent of all bank loans. The toxic loans were not accumulated in a single year. In effect, the NDIC that statutorily carries out once-a-year routine audit on every bank and the CBN Director of Supervision along with the examiners deployed to the banks had been either lax as well as collusive in covering up the mounting bad loans or the CBN Governor had willfully failed over the years to act on their findings as and when necessary.Doubtless, timely CBN action against the management of the first bank threatened with distress could have checked the spread of distress. After the court decision, the next mandatory line of action is for the laws of the land to take their course by prosecuting the known principal officers of all distressed or failed banks, relevant schedule officers of the CBN and NDIC (in all cases whether retired, fired or still in employment) and those who obtained bank loans with no intention of paying back for their individual fraudulent self-enrichment as well as contribution by omission and commission to the adversities of the banking sector and the economy at large. Upon conviction, they should be given severe and exemplary punishment.The second point relates to steps being taken to address the spreading symptoms of distress. AMCON was set up to put the initial five seriously troubled banks on their feet. But the CBN subsequently found that the bank toxic assets had been underestimated and that there persisted strong tendencies to banking distress. At that juncture, the CBN passed its responsibility to resolve the financial sector problems to the Bankers' Committee. This is an odd and unholy club of the bank regulator Central Bank and the regulated deposit money banks that should cease to exist owing to the collusive activities they champion. Meanwhile, the Committee has ultra vires suborned AMCON to take over non-performing loans of all banks, including banks that supposedly passed the audit test. Instructively, in line with best international banking practice, three banks with substantial foreign interest rejected the option to freeload and decided to offset their toxic loans. The Bankers' Committee has also usurped functions of the National Assembly and ultra vires legislated into existence a Banking Sector Resolution Cost Sinking Fund into which specific sums of CBN and bank shareholders' funds are illegally paid. The Sinking Fund proceeds supplement the official seed funding of AMCON.Latest reports put the amount already committed by AMCON to the banking sector at over N3.3 trillion, some four times its approved seed funding. But unconcerned about the implications, as it takes the country for a ride, the CBN has said repeatedly that the extra AMCON spending was at no cost to the federal treasury. Surely, the source of the additional money is deficit financing for which there has not been necessary prior authorisation. The CBN Governor should not be allowed to carry on in violation of the apex bank's enabling law. It has been shown that the CBN's incorrect handling of Federation Account oil proceeds plunges the economy into unapproved and ruinous fiscal deficits of about 20 per cent of GDP yearly. And the unbudgeted funds being pumped into the system through AMCON can only exacerbate the fiscal deficits and intensify the hostile economic conditions that have laid the economy waste for decades and which have also been largely responsible for the ballooning level of non-performing bank loans and distress.Therefore, the National Assembly should stop the CBN Governor from undermining the economy. The Governor, as a top government functionary, holds his office in public trust and should, therefore, show demonstrable evidence of relevant service delivery.
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