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In a recent op-ed
piece in the Financial Times (‘Casino gibes do our banks no justice’),
John Varley, outgoing group chief executive of British Barclays,
describes the ‘core of banking as money transmission, safe storage of
deposits, maturity transformation, provision of investment advice,
trading and market making.’

If these vital
economic services are what banks provide, they, in turn, depend on the
public trust as the foundation of their existence. In fact, ‘credit’,
the elementary function of financial intermediaries, takes its root
from the Latin word ‘credere’, which means ‘to trust.’ Each time banks
and bankers have gone against this social contract, the consequences
have been dire.

While regulators
from Basel to Washington debate new rules on capital adequacy and
liquidity, it is easy to forget that the mere adoption of stricter risk
management rules cannot by itself rebuild confidence. Today, the
greatest challenge faced by the financial sector lies in addressing the
dissonance in values between what the public expects banks and bankers
to stand for and what some of them have, regrettably, come to
represent. One year after the Central Bank of Nigeria launched its
ethical crusade to bring bankers back in line with the traditional
values of the profession, it is timely to examine if institutions that
abide by those ethos perform better than those that do not. If indeed
they do, then there is a self-standing business case for doing the
right thing by shareholders and customers.

The October 8
ruling by Justice Dan Abutu of the Federal High Court condemning
Cecilia Ibru, the former chief executive officer of Oceanic Bank, to
six months in prison and compelling her to return assets valued at over
$1.2 billion indicates a sea change in the way flagrant abuses of trust
are treated.

Understandably,
many commentators have focused attention on the scale of recovery from
a single individual and the moral dimension of unethical wealth
accumulation. Far less coverage has been given to its import for
Oceanic Bank and the burden of trust, which banks must carry.

When the CBN
announced its intervention in Oceanic Bank in August 2009, few could
have imagined the herculean task that lay before the John Aboh-led
management team. Saddled with the responsibility of leading a delicate
transition, whose outcome would determine the future of one of
Nigeria’s foremost financial services groups, the management recognized
that beyond the headline issues of shareholder equity erosion and
misuse of depositors’ funds, the bigger challenge that confronted
Oceanic Bank was to rebuild public trust in its identity and mission.

In effect,
Oceanic Bank’s management has had to juggle three balls all at once:
pressed on one side by the demands of supervising an inside-driven
forensic review of the bank’s actual health status, on another with
stabilising the institution, and on a third by providing a fair
assessment of strategic options for recapitalisation, it had to show
employees, business partners, customers and shareholders why the CBN’s
decision was the right one at the right time.

Gradually, in
several meetings with stakeholders, the management team won over its
audience with the message that Oceanic Bank had begun a new chapter.
Its consistent theme that the future is bright at Oceanic Bank
supported by a solid recovery in deposits growth by the end of 2009 and
its return to profitability has helped to put the harrowing near-death
experience behind it. But it could never have achieved such a rapid
turnaround without an emphasis on regaining the trust of its key
publics.

Attendees echoed
this sentiment at an interactive session organized by the bank in July
to sensitize shareholders on its turnaround progress and
recapitalization plans. Commending Oceanic Bank for hosting the event,
Bisi Bakare, national coordinator of the Pragmatic Shareholders’
Association of Nigeria, expressed her satisfaction with the board for
reaching out to shareholders to correct lingering misperceptions and
making sincere efforts to carry them along. On his part, Emmanuel
Ikwue, a retired Brigadier, chairman of the Coordinating Committee of
the Zonal Shareholders’ Association, shifted the dialogue from a
fixation on the sale of Oceanic Bank to how to secure the best future
for all stakeholders in the institution. He implored the bank’s
shareholders to be open-minded in the consideration of capital raising
alternatives presented by the board.

There is no doubt
that the restitution of ill-gotten assets will go a long way in Oceanic
Bank’s bid to recapitalize successfully. But adequate capital alone
does not guarantee the competitive strength and attraction of a
financial institution. Trust must be at the root. If there is one thing
that the bank has relentlessly laboured to do since that balmy
afternoon in August 2009 when Nigerian banking was changed forever, it
has been to regain it. Just as the theme of 2010 global brand campaign
by UBS, the Swiss bank, says ‘we will not rest’ until we meet our
customers’ expectations, the reformed Oceanic Bank may well have
solemnly sworn not lay down its oars until it has regained the full
trust of its stakeholders. Justice Abutu’s judgment has only given
added fillip to that purpose.

Sunday Badmus is a corporate finance consultant based in Lagos.