Union Bank Announces CBN Approval of Compliance Plan

Union Bank LogoUnion Bank of Nigeria today reported to the Nigerian Stock Exchange that it has received from the Central Bank of Nigeria (CBN) the approval to go ahead with its plans for complying with CBN’s Regulation 3 on the Scope of Banking Activities and Ancillary
Matters. The CBN regulation which was issued in 2010 repealed the Universal Banking Model in which banks were allowed to provide a broad range of financial services through subsidiaries. Regulation 3 restricts Nigerian banks to operating as Commercial, Merchant or Specialised banks.

Following the approval, Union Bank will proceed to divest its interests in its non-banking and portfolio companies, with the exception of Union Bank (UK) Limited, and operate as an International Commercial Bank. “Our fulfillment of our Regulation 3 obligation to CBN comes at an important point in the times of Union Bank,” said Emeka Emuwa, Group Managing Director of Union Bank of Nigeria Plc. “Union Bank is currently on a journey of transformation, to return it to its position as one of the leading banks in Nigeria. Our ambition today is to be Reliable – to be an institution which delivers the best service possible to its customers and which consistently creates value for all its stakeholders. The Bank has
therefore decided, as one of the many steps to the achievement of its transformation goals, to focus its resources on core banking functions”.

Union Bank of Nigeria Plc recently embarked on a Transformation Programme to upgrade the Bank and enhance its performance. Several initiatives have been kicked off under this Transformation Programme, including investments in technology, upgrade of infrastructure, strategic recruitment and the review of processes to make them more efficient for customers. The Bank’s Transformation Programme has already begun to yield results. The divestment
course will further strengthen the Bank’s transformation aspiration.

“Under the Universal Banking Model, banks diversified into other financial businesses through subsidiaries and interests in associate companies to capture additional revenue streams,” explained Mr. Emuwa. “Today, given the growth and expansion in the core-banking business itself, and the ability that Banks have within that core-banking business to provide diversified and value-added products and services through partnerships and cross-sells, the importance of actually owning the non-core businesses directly has become less strategically critical”.

“The post-divestment structure will, in accordance with the objective of the CBN regulation, significantly reduce the overall risk profile of the Bank, while increasing the protection of depositors’ funds,” said Kandolo Kasongo, Executive Director and Chief Risk Officer of the Bank. “It is also expected that the divestments will release capital to the Bank to further
strengthen its balance sheet and enable Union Bank generate better returns to its various stakeholders.” 2

The divestment process will be carried out with due process with proper consideration given to the characteristics of each portfolio company.

The CBN approval allows Union Bank eighteen months within which to implement its Compliance Plan. The Bank will ensure that only investors who are able to strategically drive the future of the portfolio companies are engaged. Pending the conclusion of the divestments, Union Bank remains committed to all its portfolio companies.

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