Distressed banks: Lawmakers block CBN’s N50bn sinking fund proposal

The House of Representatives  yesterday blocked an amendment of the Asset Management Corporation of Nigeria (AMCON) Act proposal for a yearly payment of N50 billion by the Central Bank of Nigeria (CBN) into the Resolution Cost Fund (sinking fund).

The Act provides that N50 billion is paid “from time to time” into the sinking fund as determined by the CBN board.

The fund, also known as a “sinking fund” was created by AMCON to bail out distressed banks and other financial institutions.

However, when the House Committee on Banking and Currency’s report on the amendment of the AMCON Act, 2010 was considered and passed at yesterday’s plenary, the chamber approved amendments to Sections 2, 16(5), 22(2), 34(1)-(2), 35, 46(2), 48, 57, 60 and 62 of the AMCON Act.

In their objection to Section 61(2), Sekonte Davies and Osita Izunaso insisted that making the CBN pay N50 billion yearly into the sinking fund will encourage corruption in the banking sector.

Davies said, “there is no provision showing how the money will be recovered. Are we saying that the Federal Government has become Father Christmas? We are creating room for massive corruption.”

Given the opposition to the section, Chairman of the House Committee on Banking and Currency, Jones Onyereri, however, stepped down the proposed amendment to enable him do more legislative work.

Recently, it was reported that CBN deducted N111 billion as contributions to the Sinking Fund of AMCON.

But stakeholders have argued that this money would have been used for other profitable ventures by these banks or better still paid to them as dividends.

The CBN contributes N50 billion while banks contribute an amount equivalent to 0.3 per cent of their total assets.

Source : SunOnline

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