Union Bank of Nigeria (UBN) Plc has said that it would need about N300 billion to recapitalise the bank and take capital adequacy level to zero.
Group Managing Director of the bank, Funke Osibodu, who disclosed this in an exclusive interview with LEADERSHIP in Lagos, said that the bank needed at least N200 billion to take its capital to zero level and N100 billion to meet capital adequacy level which was statutorily a minimum of 10 per cent of risk weighted assets (an ideal of 15 per cent), if its banking licence was to be retained.
According to her: “We need at least N200 billion to take the bank’s capital to zero level, and then on top of this, we need to take our capital to what is referred to as “capital adequacy” level, which is statutorily a minimum of 10 per cent of risk weighted assets (an ideal of 15 per cent), if the banking licence of the bank is to be retained.
The bank thus needs close to another N100billion after getting to zero level to be adequately capitalised.”
She said that injection of fund into the bank by Assets Managment Corporation of Nigeria (AMCON) was to significantly reduce the risk of failure by picking up the negative capital while leaving shareholders and core investors to finish the capitalisation
She noted that from the data the bank had in the last four to five years, public offers as low as N20 billion failed to be fully subscribed, not to talk of N300 billion for one bank out of eight banks needing large sums of capital.
She stated that investors wanted to be assured of the safety of their investment and that the bank would be fully capitalised at the end of the day, noting that “if the negative capital is not covered, the bank would have failed to meet the statutory capital requirement and thus stands the risk of losing its banking licence with shareholders and new core investors losing their investments.”
She said that the plan B of the bank if the first arrangement failed could be either to hand the bank over to the Nigeria Deposit Insurance Corporation (NDIC) to liquidate or AMCON or government could become 100 per cent shareholder, if there was appetite.
She stated that in the international financial markets which affected by the global meltdown two things were normally done, it was either they allowed the bank to fail, like Lehman Brothers or they (regulators) took over the bank, like Northern Rock.
She said that in the case of Nigeria the CBN had decided that it would not allow such takeover to happen, unless there is no other choice and that is what has been happening in the past one year.
What the CBN has done in its own wisdom is to say that this process will not continue forever and that by September capitalisation process must be concluded. In other words, they are saying that they are removing their forbearance and going to the next stage.
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