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Union Bank of Nigeria Plc at the weekend said it will divest its non-banking subsidiaries within the next 18 months in order to comply with the Central Bank of Nigeria (CBN ) regulations separating business and retail banking.
The central bank had three years ago repealed the universal banking model and enforced a new minimum capital requirements for banks in a bid to avoid a repeat of the 2009 near collapse of several lenders, including Union Bank.
Union Bank scaled a recapitalisation hurdle after the central bank propped it up and it agreed a $750 million cash injection by a group of investors to keep it afloat.
"Following (central bank’s) approval, Union Bank will proceed to divest its interests in its non-banking and portfolio companies and operate as an international commercial bank," the bank’s Chief Executive Officer, Mr. Emeka Emuwa, said in a statement.
Reuters also quoted Emuwa to have said the bank had 18 months to implement the divestment, saying that owning non-banking units had become less important with the growth in its core business and its ability to partner with other firms to cross-sell products.
The CBN Governor, Mallam Sanusi Lamido Sanusi, had launched a historic $4 billion bailout of nine banks shortly after taking office in 2009, pledging to reform the industry and get credit flowing to the productive real sector and small businesses.
The new banking model requires lenders to sell all non-core businesses and form a holding company if they intend to carry out insurance, asset management and capital market activities.
Sanusi had said his primary objective was to ensure banks were effectively supervised and to ensure the safety of depositors' funds by prohibiting them from speculative capital market activities.
"The post-divestment structure will reduce the overall risk profile of the bank, while increasing the protection of depositors' funds," Union's Chief Risk Officer, Kandolo Kasongo, said, adding that the sale proceeds would be used to boost the bank’s balance sheet.
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