Tuesday said the three banks was to save depositors’ funds.

Managing Director of the NDIC, Alhaji Umaru Ibrahim, said this in Abuja, though he said the managements of the banks “tried their best to keep the banks afloat.”

The NDIC last Friday nationalised BankPHB, Spring Bank and Afribank and sold them to the Asset Management Corporation of Nigeria.

“If you don’t have money or capital, you (the bank) are almost dead. So, having that in mind and considering the need to protect depositors, we have to move in to save the situation, using the NDIC Act of 2006,” he said.

He said that if the regulators had not intervened the way they did last Friday, the nationalised banks would have wound up operations before the September 30 deadline given by the Central Bank of Nigeria for them to recapitalise.

The NDIC boss explained that after the N620bn bail-out given to the nine rescued banks by the CBN, in August 2009, the three nationalised banks still exhibited symptoms of a failed institution.

He said, “The CBN issued a statement in which it warned the banks to recapitalise before the end of September and that if they failed, they would be handed over to us (NDIC) to manage, sell or liquidate.

“But the bottom line is that there have been a continuous deterioration in the financial conditions of these banks, they have totally lost their capital; the shareholders’ funds are negative and even below zero. These banks have been living on the life support system guaranteed by the Central Bank - that is largely the inter-bank guarantee.”

Ibrahim added, “They are not able to mobilise deposits, they are not able to attract new customers, they don’t have liquidity except the ones they are borrowing from other banks and other banks actually will not give a kobo but for the CBN guarantee.

“So, what is banking if you are living on borrowed funds and you are not able to retain your customers when they are running away and withdrawing their money?”

The NDIC boss also said that following the acquisition of the banks by the Asset Management Corporation of Nigeria, they had now been fully recapitalised to carry on normal banking operations.

To this end, he said, the management of NDIC had approved the extension of the insurance cover for the depositors of the new banks.

He noted that the move would help to ensure that depositors’ funds in the new banks were protected, thus making the banks more profitable.

Ibrahim said, “As a regulator, we will continue to exercise our function so as to make sure that the banks remain sound and profitable. This is to ensure that depositors of these banks continue to enjoy comfort and protection.

“So, we have extended insurance coverage to these three new banks and we want to state clearly that even though AMCON is a shareholder in the banks, it will not interfere in their running.”

Contrary to widespread belief, the NDIC boss said the management of the three banks performed creditably well but that they were overwhelmed by the bad state of the banks. 

Ibrahim said, “The outgoing managements were carefully selected. And given the rot in these banks, there was nothing the managements could have done. They were selected and given a mandate to determine the rot, identify malpractices and turn the banks around.

“So, if it had taken somebody 10 years to run a bank down, what can somebody who has just spent two years do? They moved the banks from a bad position to a position where they could sign TIAs and they did their best.”