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Polaris Bank And Alleged Loan Losses To Ex-Directors Without Collaterals


Nov 5, 2023

A recent report circulated by some sections of online media, titled “Polaris Bank loses N26bn loans granted to 6 ex-directors without collaterals,” has raised several claims related to figures, interpretations, and banking practices. This article aims to provide a thorough fact-check and analysis of the claims made in the report.

Claim 1: Polaris Bank has lost N26.005 billion worth of loans granted to 6 ex-directors, mostly without collaterals.

This claim is challenged on the basis of a lack of understanding of accounting principles and an inaccurate interpretation of the bank’s financial reports. The story was based on the audited accounts and reports for the year ending December 31, 2022, which were approved on March 20, 2023. The 2021 insider credit status report listed eight directors with total outstanding loans of N25.827 billion, while the 2022 status report showed that four directors had fully repaid their loans. The 2022 report indicated a total of N31.646 billion in insider credits related to the four remaining ex-directors. This clearly contradicts the claim that the bank has lost N26.005 billion in loans.

It’s important to note that this report also mentions a significant increase in one ex-director’s loan, Jason Fadeyi, due to accrued interests and foreign exchange rate fluctuations for a foreign currency-denominated loan. The report highlights that this particular loan had a perfected collateral in the form of a debenture of the company’s assets. The loan was also syndicated with eight banks, and the collateral was managed by FBN Trustees.

Claim 2: As of December 31, 2022, total outstanding loans owed by these ex-directors of Polaris Bank amounted to N57.473 billion.

This claim is questioned for failing to consider the comparative reporting basis. The reporter arrived at the N57.473 billion figure by simply adding the total outstanding insider credits in 2021 and 2022. However, the story overlooks the fact that these are comparative tables and doesn’t account for the fact that some loans were carried forward from the previous year. Therefore, the claim of N57.473 billion in outstanding loans is not accurate.

Claim 3, 4, 5, 6, 7, 8: Claims about specific loans by ex-directors without repayment.

These claims are rebutted by the bank’s 2022 audited report, which shows that some ex-directors had indeed repaid their loans. The report also provides explanations for changes in loan amounts, such as accrued interests and foreign exchange rate fluctuations. Notably, one ex-director’s loan was syndicated and had a collateral debenture. It is also emphasized that one ex-director’s loan was fully paid in February 2023, prior to the board’s final approval of the accounts.

Claim 9: Collateralization of loans.

This claim is challenged for misleadingly suggesting that loans without collaterals are unusual or questionable. The report fails to acknowledge that both secured and unsecured loans are standard in banking practices. Unsecured loans are typically based on subjective assessments of a customer’s creditworthiness and goodwill. The story doesn’t consider that banks often offer unsecured loans based on their internal guidelines.

Claim 10: Insiders.

The report’s characterization of insider transactions in banks is contested. The story fails to recognize that both the Banks and Other Financial Institutions Act (BOFIA) and Central Bank of Nigeria (CBN) Prudential Guidelines provide provisions for insider-related transactions. Insider loans are guided by specific regulations, and banks must adhere to these regulations.

Claim 11: Classification of loans.

The story’s classification of loans as “lost” is criticized for not understanding the banking terminology related to loan classification. Loans are categorized based on specific timelines, and a loan classified as “lost” doesn’t necessarily mean it won’t be recovered. This classification is a reference to credit risk management and not an absolute statement of the loan’s recoverability.

In conclusion, the claims made in the report “Polaris Bank loses N26bn loans granted to 6 ex-directors without collaterals” are found to be erroneous and misleading. The report’s failure to accurately interpret financial reports and its lack of adherence to banking regulations raise questions about its credibility and motive.

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