IT has been a truly remarkable week since the news broke about what our banks have been doing with the money we keep in their custody. In that time, the focus and contention seem to be on and between the CBN (its governor) on one hand and the very big and very powerful people who took the money on the other. The issues have also been very big, just as the digits have been interminable. And for that reason, the talk has been about boards (of directors), chairmen and corporations of varying scales and enormity. Real big issues!
With all the controversy also came the inevitable additions to the national vocabulary. We now know (or think we know) something about "margin loans", "tier-two capital", "past due obligations", etc, etc. So much big, big grammar, none of which should concern us, the small people who actually own the money in these banks.
The arguments even drifted from the immediate and experiential to matters scriptural. From somewhere, whispers, then screams of a "Sharia Agenda" was smuggled in: issues of even less concern to us. But these other things concern the spin people, so they prefer to keep the issues big and classy, even surrealistic. But I say we begin to tell real stories about real people; maybe the gravity of what my bank (and their friends) did with my money would start to make more sense, even to their spinfolks.
Here is my own story. About 15 months ago, I started a target-project account for my studies with one of the five banks on the CBN bailout list. The bank has a specialised savings package called the Quality Education Plan (QEP). Since then I have religiously put away a little something from my small earnings towards realising my dream project. By the time the news broke on Friday, I was about halfway through saving enough money for my programme.
As the picture began to emerge, I listened as the Central Bank governor himself told the story of how hundreds of billions of naira worth of debts were non-performing and of banks that were "permanently locked in as borrowers". But I was not as interested in these details as I was in the identity of the banks involved. So I listened. Then the roll call started, and there it was! My own bank! It also happens to be my friend's bank.
She owns a micro-scale business, with the entire earnings and operating capital in that bank. But the story gets even more serious - she also shares the same bank with four siblings. Their mother became a widow in June (only two months ago); the old woman's entire savings is lodged in the same bank. In our stories (mine, my friend's and her family's), I am still trying to find a connection, any connection, with any tribe or religious interest.
It is even harder for me to understand how it relates to other bank(s) that are not on the list that 'should' be there. The way I see it, this thing is entirely between the regulator, my bank and I. It is also a very real and serious issue. My QEP account contains my entire life savings. So it goes beyond a bread and butter issue for me. It is my future, my hope. But for my friend's family, it could very easily become a life and death matter. My friend was worried about her old and grieving mother finding out that the bank is 'in trouble'. I told her what the CBN governor told us earlier that day: that more money has been brought in to save our bank. I also relayed Mr Lamido's assurances that "no bank would be allowed to fail".
But I know the story does not end here because the banks (and their friends who took our money) would not simply accept the bailout as the most rational way out for every party in the long run. For them, it is not enough that they took unbelievable liberties with our money. It does not even bother them that public funds (bailout money) belonging to the same people they have short-changed is being used to bail out their banks. They are simply in no mood to assume responsibility, judging by the noise they are making.
But I think this attitude is largely because the tone of discourse has been defined by endless niceties and too many euphemisms. References to "full disclosures", "corporate governance" "risk management" etc. cannot tell the entire story. The issues confronting us are basically issues of morality. Here is practical example: I now know, for instance, that my bank extended loans to individuals to purchase shares of the same bank!
The cummulative value of these loans is in tens of billions of naira. These loans are then collaterised (secured) by the face value of the stocks. In essence, we cannot get our money back unless the borrowers trade the shares at a profit; because the stocks in the bank's possession are as valuable as the market price we can get for them. This kind of arrangement is called Moral Hazard: it is when people take decisions, leaving others to take responsibility for the consequences of those actions. It is also criminal. Securities-based lending, just like every other kind of credit, is tied to title-validated assets. But my bank gave money to people entirely on the guarantee that the funds would be used to acquire the assets which would in turn serve as security for the loans. And we are talking about highly volatile assets (especially in a speculator-infested market like our stock exchange at that time).
In my entire interaction with my bank, I had more difficulty accessing funds in my QEP account than these speculators had to other people's money. In my case, a mandatory three months lapse time is stipulated between withdrawals from my QEP account. Earlier withdrawal would attract very unpleasant penalties from my bank. But I had quietly and graciously borne the liability because my QEP project was my hope and my future. It was also because I am aware of my obligation to submit to the rules I have signed up to. But then, it seemed my bank was operating in a world where there are scant obligations and fuzzy moral boundaries. And it is not fair. It is also not fair to the man who has showed up to carry the wages of my bank's profligacy.
Our Central Bank should normally be preoccupied with growing the economy with the management of our exchange rate, interest rates and inflation, not this costly diversion imposed by my irresponsible banker. Plus, the bailout money has to come from somewhere. All of which are more than enough ingredients for more than enough sleepless nights. I wonder how much sleep the Central Bank man has had since all this started.
By bailing out my bank, the apex bank has also assumed the bank's liabilities which would in turn be adopted in the national accounts (this is required by international accounting standards). The CBN would also guarantee future loans to these banks. All these, so my bank would not fail. On my part, I have resolutely refused to act in my rational self-interest. I have refused to take my money from this bank because, like Mr Lamido, I do not want my bank to fail. So we have made sacrifices - the CBN and I. But my bank (and their friends) must necessarily be part of this cross.
Bailouts are necessarily preceded by management substitution (international best practices). So relieving my bank of its management is no atonement. Also, bailout money is no charity: it is money taken from the same taxpayers whose money the banks have gratuitously distributed to their friends. It is the reason we must recover these funds from my bankers and their friends at all cost. I do not know a lot about recovery law but I have a feeling that this last responsibility is beyond the CBN, my bank or I.
So the entire criminal justice machinery must be fully deployed by those at the very top of government business. I also no longer want to see my bankers back in management. I will take my money and run, if they are ever allowed back in, either by the courts or anyone else. This is my solemn pledge. The relationship between my bank and I is like the doctor-patient, lawyer-client situation. It is a position of absolute trust, and I can no longer trust these people with my money.
Plus, we would all be running the risk of the moral hazard question by encouraging future risky behaviour. Those who invented the moral hazard debate also applied it to those who encourage risky behaviour. Some literature even provides valid illustration with bailout economics. The only way to avoid this trap is to not let these people back in the positions where they can bank on another bailout - you cannot encourage risky behaviour if you do not give people a second opportunity to misbehave.
Even as I speak my mind, the identity of these people (my banker and their friends) suddenly come into focus, and I am not sure any of us (even the CBN man) can pull this one off: these people are not used to rendering account. They have either taken (or collaborated with their associates in government to take) government money from government coffers and not even the government machinery could stop them. Now, we are talking about private capital in their custody.
Still, I am hopeful because every time I look into Mr Lamido's eyes, he reminds me of a character from Don't-Mess-With-Me Street. I am therefore praying and hoping that, this time, the resolve of the culprits would not exceed the capacity of the state to provide justice.
* Okpene lives in Abuja.
