Source: Onoodor    Date: May 28, 2010

The Central Bank has clarified to the media that its proposed program to strengthen the banking sector will include provision of equity capital and reserve funds to commercial banks to enable them offer more credit, to help them regain and retain public trust, and to make sure there is no need for the government to step in to meet their obligation to account holders. All banks will be told to have a certain amount of reserve funds, and, if they cannot raise it themselves, they can ask for financial support from the Government. However, all such grants will have to be repaid under a strictly enforceable timeframe.

The Central Bank will receive progress reports every two months. The government will not interfere in the day to day operations, not even where it has provided financial support of equity capital, which must be repaid by 30 months. Failure to do show will authorize the Government to transfer the amount of outstanding loan into shares of the bank, claiming them for itself or selling them to other investors.

The statement from the Public Relations Department of the Central Bank did not contain a specific answer to a question on whether foreign individuals or institutions will be allowed to bid, or whether the whole purpose of the program was to permit and encourage such foreign investment in the country’s banking sector.