CBN Revokes Operating Licence of Express Discount Limited | Bizness Watch

CBN Revokes Operating Licence of Express Discount Limited

Central Bank of Nigeria (CBN) on Friday announced that it had revoked the operating licence of Express Discount Limited (EDL), with effect from 18th July, 2013 as contained in the Federal Government Official Gazette No. 49 Vol. 100 of 19th July, 2013.

The apex bank said a liquidator will be appointed for the company as required by extant laws to resolve its assets and liabilities.

EDL, with headquarters at Marine Plaza View, 60 Marina, Lagos Island, was incorporated on the 25th of November, 1992, as a private limited liability company and was licensed by the Central Bank of Nigeria (CBN) on the 22nd of July, 1993 to carry on business as a discount house. It commenced operations on the 23rd of July, 1993.

EDL is owned by a group of financial institutions which include Bank Of Industry, Keystone Bank Limited, Fin Bank Plc (now part of FCMB Group), Omis Investment Limited, Nicon Insurance Plc, Niger Insurance Plc, Skye Bank Plc and Enterprise Bank Ltd.

According to Tokunbo A. Martins, Director of Banking Supervision, of the apex bank, the decision was taken because EDL no longer had sufficient assets to meet its liabilities, and the shareholders had been unable to inject the capital required for the continuation of its operations.

Martins said CBN’s earlier examination of EDL’s operations revealed that the company: maintained false and misleading books of account; had huge exposure to Margin Loans; engaged in activities in contravention of Discount House guidelines; indulged in distress borrowing by sourcing funds at rates higher than it could earn by investing the funds; had negative shareholders’ funds and required a minimum capital injection of N21 billion if the company was to continue operation.

Due to these short comings, he said, the Board of EDL, in November 2011, relieved the Managing Director/Chief Executive Officer of his appointment and the CBN directed the Board to take necessary steps towards ameliorating the situation, and this included the injection of fresh capital.

“However, the shareholders foreclosed any injection of fresh capital into EDL’s operation but rather predicated their recapitalisation plan upon a bail-out possibility from the CBN. The CBN, however, did not see any justification for the injection of funds to rescue the discount house as its total assets constituted only 0.3 per cent of the banking industry assets. Therefore, its failure would not in any way precipitate or constitute a systemic crisis,” he said.

He said the revocation of the operating licence was inevitable mindful of the fact that EDL no longer had sufficient assets to meet its liabilities, and the shareholders had been unable to inject the capital required for the continuation of its operations.

Meanwhile, the CBN said a liquidator will be appointed for the company as required by extant laws to resolve its assets and liabilities.




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