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Anxiety as mortgage bank faces liquidity crisis

By Chijioke Nelson
16 February 2015   |   8:40 pm
BY oversight and/or outright negligence on the part of regulatory authorities, the Nigerian financial system is on the verge of another brand of banking crisis.    This follows indications that a major local mortgage bank is suffering from liquidity crisis, which is presently inhibiting it from meeting financial obligations to depositors.    The latest pointer…

CBN-GOV-EMEF

BY oversight and/or outright negligence on the part of regulatory authorities, the Nigerian financial system is on the verge of another brand of banking crisis.

   This follows indications that a major local mortgage bank is suffering from liquidity crisis, which is presently inhibiting it from meeting financial obligations to depositors.

   The latest pointer to the fact that the financial institution has been deep into the crisis, The Guardian learnt, was that a depositor’s N1 million transfer request from a mortgage savings account could not be met for over two weeks.

   A reliable source disclosed that the mortgage bank’s liquidity issues started about six months ago, when it also failed to pay on demand the sum of N900,000 requested by a savings account customer for over eight working days. 

   The bank, according to the source, had blamed it on poor network connection, but this excuse became too flimsy as six months ago, a customer had furiously demanded that her account with the bank be closed instantly and all her savings given to her.

   Likewise, before the N900,000 was paid, the source noted, the customer had threatened to cause trouble at the bank’s head office, which made the officials to urgently rally their branches to raise the amount.

   Currently, the mortgage bank, which claimed to have recently received over N1 billion from the Federal Mortgage Bank of Nigeria to disburse to housing loan applicants, the added, is not picking calls from the customer and as at press time, the N1 million transfer request has not been met.

   An official of the bank, before refusing to pick calls, had started making excuses with the term “platform”, but could not explain whose responsibility the platform is between the two financial institutions in question.

   Nevertheless, an insider had unwittingly revealed that the financial institution’s liquidity ordeals were a result of investments in assets that were yet to return proceeds. This may as well raise concerns over what caused non-returns from those investments that are now leading to illiquidity – is it another brand of non-performing loans? How strong is the supervision of the mortgage banking?

   Another insider claimed that the mortgage bank currently has some issues with its correspondent bank (a full commercial bank), which has caused breach in transfers and payment to customers on demand. 

According to the source, almost the mortgage bank’s entire cash assets are with the correspondent bank such that it cannot do anything except through it.

   This also raises further concerns over which of the two financial institutions is the source of the assessed illiquidity that has blocked the free-flow of transfers from a payment-on-demand-based account. 

   Anxieties may be heightened over the safety of the savings made by customers in anticipation of the disbursement of housing loans if they cannot be accessed. Already, there are palpable fears that the development in one of the major institutions in the sub-sector may have worsened in many others, especially the smaller ones.

   The mortgage bank sub-sector was not left out of Central Bank of Nigeria (CBN) reforms in the financial system, having concluded the recapitalization exercise last year and reclassified the operations into state, region and national licences.

  The CBN had hoped that the post-recapitalisation period would witness a strong mortgage sector with access to complementary funding sources from the Nigerian Mortgage Refinancing Company, the Federal Mortgage Bank of Nigeria and other housing intervention funds to ensure that mortgage funding will be more available and not dry up again as it did in the past.

   Mortgage banks have also been designated as channel for the disbursement of housing loans in the current administration’s revolutionized housing agenda.

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