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Editorial: House Probes, SEC and BanksDecember 14, 2011

The golden age is before us, not behind us." - William Shakespeare

The decision by the Securities and Exchange Commission to grant approval to theapplication before it from Union Bank Plc is a welcome relief to a market that is need fora closure to this episode.

We had written an analyst commentary on matters for clarification on the scheme ofmerger in a news post titled The New Union Bank Transaction Matters Arising.Subsequently, the SEC had cause to raise procedural concerns on specific issues on theapplication (see SEC Rejects Union Banks N9.5b Offer Bid). The bank responded to both

concerns to the satisfaction of the SEC.

Last week, the House Committee on capital markets issued an instruction (Houserequests SEC to suspend Union Bank Plc recapitalisation) requesting that the approval

required to conclude the transaction be suspended.

The bank represented that it had complied with the provisions guiding therecapitalisation programme as defined by the Central Bank of Nigeria and the relevantaspects covered by the Securities and Exchange Commission. Our independent enquirieswould indicate this to be so.

In granting approval to Union Bank to take steps that would see it fulfil the terms of itsrecapitalisation, the SEC has acted within its mandate and in furtherance of the publicinterest mandate. The HCCM must therefore see the slight inconvenience arising fromthe very public suspension order as nothing more than an administrative issue.

This development brings to fore the growing concern over the role of such probes andpublic communication of administrative issues regarding oversight on the banking

reforms for listed banks. Today, we learnt that the Reps Committee Summons Ecobank,Oceanic Over Acquisition. This is a needless exercise.

Only recently, we had argued against such action in a position paper titled How toRestore Market Confidence in an era of Economic Uncertainty, that the transactions forwhich the House seeks to hold a public enquiry is a matter for the CBN and SEC(regulators and public offices covered by the oversight responsibilities of the NASS) and

not directly for the buyers (who have simply followed the laws of the land as is). Toask them to come and explain a regulator approved matter in public is the clearestattempt at ridiculing the regulator and by extension undermining the market

confidence effort we are all working towards.

For the avoidance of doubt, we do not advocate for a second, that the deal(s) are offlimits to legislative oversight. That would be wrong and against the spirit of the

constitution. Every citizen/institution must be entitled to an opportunity to usedemocratic means to understand, clarify and most importantly, resolve issues. The NASSis the body so authorised to do so and we are mindful of that.

At Proshare, we however see this development as the great opportunity to take head-onthe lingering imbalance between the vision/objective of the house (NASS) and marketregulators; and believe its is important for all stakeholders to get on board this vehicle ofopportunity to engender a better market-regulator-legislature matrix.

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This issue predates the current office holders and quite frankly, the approach is wellworn and unproductive to all concerned. With a little bit of innovation from all parties,

we can turn this around.

The house should, first, be interested in the issue to provide a balance betweenprofessional/regulatory perspectives and the much needed compromise required to

address the concerns of the excluded/losers. This is a much needed insight/perspectiveoften ignored in delivering a package that allows us to move on. Fact is that this impasseremains the driving force behind the inquest that is slowing us down from the main/bigpicture.

Second, the house must come to terms that while it should not abandon its oversightresponsibilities, it must advance legislation that promotes the interest of Nigeria(ns) like

it is doing with the capital formation bill it seeks to promote which should be commendedand supported by all.

Finally, it is imperative that all stakeholders recognise the enormity of the challenge

facing our economy and financial services sector in 2012 and take steps to close ranks in

solving them.

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