Bankers’ Committee laments rate of APG defaults

The Sub-Committee on Ethics and Professionalism of the Bankers’ Committee has expressed displeasure at the increasing rate at which Nigerian banks are refusing to honour their guarantees particularly Advance Payment Guarantees (APGs).

In a document obtained exclusively by Ripples, the Bankers’ Committee raised the alarm at its last Bankers’ Committee meeting in Abuja in June 2015.

The Sub-Committee on Ethics and Professionalism of the Bankers’ Committee in the document said: “It was alarmed at the frequency of default by banks on APGs.”

APGs are issued on certain terms and conditions and upon crystallisation, decisions should be based on such terms and conditions considering that guarantees are payable on demand.

The Sub-Committee’s worry over the refusal of banks to honour APGs is not unconnected with several cases before it involving banks petitioning other banks over their refusal to honour genuine APGs.

Of the three cases adjudicated by the Sub-Committee at the last Bankers’ Committee meeting, two involved default in one bank honouring a valid APG issued for contracts in which banks customers failed to meet up to their own ends of the agreement.

One case involved Sterling Bank Plc and Unity Bank Plc and the other involved Skye Bank Plc and Ecobank Plc.

The Sub-Committee is also worried at the spate of litigations by customers of banks especially on issues of guarantee thereby frustrating the contract.

The Sub-Committee observed that in some cases it is the banks that encourage their customers to go into litigation, a development, the Sub-Committee considers inimical to the growth of the banking industry.

Read also: Exclusive… Unity, Sterling banks at war over N2b facility

One particular issue that has angered the Sub-Committee is that of United Bank for Africa Plc (UBA) which filed a law suit (FHC/L/CS/456) against Ecobank Nigeria Limited and three others in a matter that had been decided by the Bankers’ Committee through the Sub-Committee on Ethics and Professionalism.

The Sub-Committee frowned at this utter violation of its rules and procedures as banks were not expected to bring cases against each other after it had been professionally adjudicated upon by the Sub-Committee on Ethics and Professionalism and such decisions ratified by the Bankers’ Committee.

The Sub-Committee therefore, resolved at its last meeting “that a letter should be written to UBA Plc to explain reasons for its action.”

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