How First Bank almost crashed due to bad loans, others in 2016- Emefiele
The Central Bank of Nigeria (CBN) has revealed measures it took to help First Bank of Nigeria out of a financial crisis that almost consumed the bank in 2016.
The Governor of CBN Godwin Emefiele disclosed this in the press statement issued to announce the change of management on Thursday.
The apex bank disclosed that the bank maintained healthy operations up until the 2016 financial year when the CBN’s target examination revealed that the bank was in grave financial condition with its capital adequacy ratio (CAR) and non-performing loans ratio (NPL) substantially breaching acceptable prudential standards.
CBN said the problems at the bank were attributed to bad credit decisions, significant and non-performing insider loans and poor corporate governance practices. The shareholders of the bank and FBN Holding Plc also lacked the capacity to recapitalize the bank to minimum requirements. These conclusions arose from various entreaties by the CBN to them to recapitalize.
This prompted the CBN to step in to stabilize the bank in its quest to maintain financial stability, especially given FBN’s systemic importance as enumerated earlier.
Regulatory action taken by the CBN in this regard included:
i. Change of management team under the CBN’s supervision with the appointment of a new Managing Director/ Chief Executive Office in January 2016.
ii. Grant of the regulatory forbearances to enable the bank work out its non-performing loans through provision for write off of at least N150b from its earning for four consecutive years.
iii. Grant of concession to insider borrower to restructure their non-performing credit facilities under very stringent conditions.
iv. Renewal of the forbearances on a yearly basis between 2016 and 2020 following thorough monitoring of progress towards exiting from the forbearance measures.
Emefiele said the measures had yielded the expected results as the financial condition of FBN improved progressively between 2016 when the forbearance was initially granted to the current financial year.
For instance, profitability, liquidity and CAR improved whilst NPL reduced significantly.” he said.