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Depositors
and shareholders of Savannah Bank Plc and Societe Generale Bank Nigeria
Limited may have to wait longer before accessing their funds since the
Central Bank of Nigeria (CBN) has outlined conditions under which both
institutions can open their doors for business.

Lamido
Sanusi, CBN governor, said even though their licenses have been
returned, both banks must show proof of strong financial capacity, a
new business model and foreign or local partners to show that they are
ready for business before it can extend any assistance to the promoters
of the banks.

“Of
course, with non performing loans, if they have collateral, we can buy
the non performing loans. If they want support similar to the ones we
have extended to other banks, CBN will give them all the support that
is reasonable.” According to him, it is left for the banks’ owners to
decide whether they wanted to remain in banking business or not.

A tale of two banks

Societe
Generale, owned substantially by second republic senate leader, Olusola
Saraki, was sent out of the clearing house in 2003 following its
inability to meet its financial obligations. During this period, the
bank was unable to fund its CBN Account, which was overdrawn by several
billions of naira. It also couldn’t meet the N25 billion minimum
capital during the banking consolidation of 2005, which led to the
withdrawal of its banking license.

The
bank then began legal proceedings, insisting that the revocation of its
banking licence was in bad taste, and that it was not given enough time
to recapitalise. In April 2008, a Federal High Court sitting in Abuja
granted its request and ordered the CBN to restore the bank’s license.

For
Savannah Bank, a Federal Court of Appeal in Abuja on February 20 2009
declared that the CBN and Nigeria Deposit Insurance Corporation (NDIC)
wrongly revoked the bank’s license and that it should be allowed to
return to business. The court then granted the bank an 18 month
recapitalisation deadline which expires next month. Savannah Bank is
also owned by a former governor and senator, Jim Nwobodo.

This
was supposed to be a breather for the bank’s 85,000 shareholders, and
over 750,000 depositors who had their fund trapped for the seven years
that the bank was closed.

However,
since both banks won their case against the regulators, there had been
no visible effort to reopen for business. “It is not for the central
bank to be working towards bringing SGBN or Savannah back but for the
directors and shareholders to work towards opening for business,” Mr.
Sanusi said.

Open shop, not partnership

Obi
Adindu, media consultant to Savannah Bank said then that the bank was
planning a multiphase opening strategy that would see the bank opening
its branches gradually and not all at once. “What we are doing right
now is harmonisation of assets to ensure that what we have in our books
tally with what are in the books of the liquidators. This is a normal
process. It is after this that we will take full control of our
premises nationwide.”

Boniface
Okezie, the leader of one of the shareholders’ group said the central
bank should not force the partnership option on the bank but should
rather support the bank to open its shop to customers first. “It is
obvious that the current investors do not have the financial muscle to
run the banks. The CBN should allow them to open shop first, reactivate
accounts of customers and from there they can begin to talk about other
things. They need to get new hands who will install corporate
governance in place so that the bank can be run professionally.”

Shareholders
say a major concern is the ability of the bank to return to an industry
that has undergone fundamental changes since its doors were shut about
eight years ago. Apart from meeting obligations to depositors, the bank
would need to deploy funds in total overhaul of its operation
machineries.

Banking
is highly IT driven and most of the facilities and infrastructure which
the bank relied on seven years ago have become obsolete. The hardware
and software would require total replacement while the requisite
manpower would have to be deployed to ensure the competitiveness of its
operation.

A
source who preferred to be anonymous said the greater challenge would
be for the bank to stand alone at a time when many operators are
anticipating further mergers and acquisition in the industry. “Efforts
at reopening the banks must be communicated to the public so that all
stakeholders would appreciate the genuine effort to reposition the bank
and open for business. This will help to build confidence of depositors
and shareholders,” he said.