Court orders CBN to release Societe Generale’s license

Charles Soludo, CBN Governor

Societe Generale Bank’s (SGB) depositors have cause to smile as the bank is planning a big “bounce back,” years after the Central Bank of Nigeria ( CBN) revoked its licence.

A federal high court in Abuja yesterday set aside the withdrawal of the bank’s operational licence.
The presiding judge, Binta Nyako, gave the order while delivering judgment on the suit brought by the SGB and two limited liability companies, ECAD Nigeria and Stockland Nigeria, against the CBN, Nigerian Deposit Insurance Corporation ( NDIC), attorney-general of the federation ( AGF) and others.

However, the attorney-general of the federation and minister of justice through Adetokunbo Ademola told Business Day that the Federal Government would go on appeal immediately.

The court established that the revocation of SGB’s licence was without justification and in bad faith.

Nyako also set aside the purported interim management appointed for the SGB as well as all the actions taken by the Federal Government to wind up the bank .

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In view of this verdict, the court gave the SGB 30 working days to comply with CBN’s guidelines on consolidation.

The CBN seized the operational licence of the bank in 2005 on the ground that it failed to comply with its directive and guidelines on consolidation, which saw the existing banks recapitalised to over N25-billion. The plaintiffs through Olawale Akoni (SAN) approached the court .

The SGB told the court that it was in merger talks with the Unity Bank that wanted it to secure from the CBN 80 percent forbearance of debts owned it and evidence of conversion of at least N10-billion of SGB’s outstanding deposit liabilities into equity in form of letter of confirmation from the CBN.

The court established that the apex bank (CBN) only notified the SGB of the presidential approval of forbearance a day to the expiration day of December 31 2005. It noted that the SGB got the letter granting forbearance on January 6 2006.

Nyako likened the respondents’ action to making offering with the right hand only to take it with the left hand, and declared it as a breach of duty.

The court held that the 24 hours given to the SGB to pay N1.5-billion at the expiration time was not enough.

The court vacating its earlier order on parties to maintain the status quo, restrained respondents from embarking on any liquidation of the bank within the next 30 working days.

Also joined as respondents were Olusola Saraki, a major shareholder of the SGB and two of the directors, Tope Edu and Laolu Saraki.

Following Federal Government’s directive on banks to consolidate in 2004, the CBN ordered banks to recapitalise and increase their paid-up capital to N25-billion on December 31 2005.

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The CBN suspended SGBN from the clearing house in June 2003 for overdrawing its account with the apex bank. As a result, it could no longer continue normal banking activities since it could not clear its cheques.

Its operating license was eventually revoked in 2005 due to inability to comply with banking recapitalisation requirements.

Prior to the revocation of its license, owners of the bank had made frantic efforts to return the bank to operations to no avail.

In January 2005, the shareholders of the bank were said to have beefed up the capital base from the N500 million to N2.5 billion, which the CBN neither confirmed nor denied. Nonetheless, its license was not restored.

Justifying the suspension, CBN had said the action, which according to it, was not peculiar to the bank, was in line with its statutory duties to ensure stability in the banking industry and in keeping with its Clearing House Rule.

From time to time, CBN suspends banks from the Clearing House and readmits them when the problem that necessitated their suspension is addressed.

As a standard procedure where a bank experiences net debit and consequently overdraws its accounts with the CBN, the apex bank is expected to provide a temporary overdraft accommodation, as a lender of last resort. However, where the situation persists, the apex bank takes action as that is indicative or imminent insolvency.