Asset Management Bill Set to Become Law

2010-03-11
THISDAY Newspaper-Sufuyan Ojeifo and Emele Onu

All is now set for the Asset Management Corporation of Nigeria (AMCON) Bill to become law as it received a significant boost yesterday with two key developments in the National Assembly.
The House of Representatives yesterday passed the bill after adopting the report of the Committees on Banking and Currency, Finance and Capital Market.

The bill scaled the second reading at the Senate following the presentation of the required financial compendium on AMCON. The bill has thus been referred to the Senate committee on Banking, Insurance and Other Financial Institutions, to work with Committees on Capital Market and Finance to conduct a public hearing and report back to the Senate within a maximum period of four weeks. These have automatically paved the way for the passage of the bill, which will now pass through the third and final reading at the Senate.

The Central Bank of Nigeria (CBN) and the Executive arm of government had sent a draft bill for the establishment of AMCON to the National Assembly for consideration and passage into law.
The AMCON is expected to soak the toxic assets of the CBN-intervened banks and provide liquidity to them as well as assist in their recapitalization.

Following yesterday’s milestone, the Senate will debate the bill at a public hearing before passing it for final reading. By legislative proceedings, any discrepancies with the version passed by the House of Representatives will be resolved before the Acting President, Goodluck Jonathan signs the bill into law.
The CBN said in a statement signed by its Head of Corporate Communications, Muhammed Abdullahi: “With these developments in the National Assembly, the Central Bank hopes that all scepticisms around the establishment of AMCON and unguarded speculations around political support for the reforms have been put to rest.”

The CBN reaffirmed that it has the total support and cooperation of the leadership and members of both arms of the National Assembly in its effort to restore and entrench financial stability and good corporate governance in banks.
“The AMCON is the principal vehicle for resolution of the solvency of asset quality problems that have risked the banking system in the last two years and it provides an alternative to the liquidation of distressed banks. In addition to purchasing non-performing loans from the banks, AMCON is a vehicle for recapitalising these institutions. It also holds the promise of reducing the debt overhang on capital market operators thus giving the much needed stimulus to the capital market,” said the CBN.

However, in passing the AMCON Bill through the second reading, the Senate warned CBN not to sell the troubled banks through the back door so that the interests of shareholders do not run into jeopardy.
Senators expressed concern about the mismanagement in the banks by their former managers, which they said was aided by the failure of the regulatory authorities to track them down before it (mismanagement) landed the banks in insolvency.

The lawmakers lampooned the former CBN Governor Chukuma Soludo, who they said when he was invited by the Senate, in the wake of the global financial meltdown to assess how the meltdown would affect the nation’s economy, said the banking sector was insulated from the crisis.
The senators raised concern as to the workability of the AMCON if allowed to suffer from lack of sound supervision and regulation as it happened in the banking sector.

The Chairman of the Committee on Rules and Business, Aloysius Etok said the AMCON Bill was “more than necessary for the extension and conclusion of the ongoing reform embarked upon by the CBN”.
The Chairman of the Committee on Banking, Insurance and other Financial Institutions, Nkechi Nwaogu, said the establishment of the AMCON was long overdue.

She said that asset management companies in countries such as Britain, Argentina and Japan, among others, had performed creditably.
Nwaogu said: “Today, the only alternative to bank failure is the AMCON. The 10 troubled banks accumulated non-performing loan to the tune of N1.5 trillion and government was only able to give all of them a bailout of about N620 billion.”

 

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