The Name DIAMOND BANK should ring a bell in your Subconscious. It was one name to reckon with in the banking sector. Pioneering Cashless Banking and the prestigious “Young Customer” bank. As you walked into their banking hall, the number of young staff gives a feeling of strength and quick service. This was strengthened with the Guru at the Helm of affairs Mr. Paschal Dozie.
Diamond Bank Plc (the “Bank”) was incorporated in Nigeria as a private limited liability company on 20 December 1990. In February 2005, following a highly successful private placement share offer which substantially raised the Bank’s equity base.
A bank fails for a lot of reason. Most times, a bank closes when they can no longer meet their obligations to depositors and others who are related to the day to day running of the bank. In Nigeria, we have seen some strong banks fail. Banks we see as big, strong and reliable have for some reasons failed to meet up with their obligations. A perfect example is the case of Oceanic Bank, which was bought over by Ecobank, the merger between Stanbic Bank and IBTC Chartered Bank.
Before the coming of CBN’s Bank Consolidation Program, customers woke to news of Their Banks Shutting Down. The Consolidation scheme launched by CBN in 2005, after raising minimum capital to N25 billion, made many banks to collapse into stronger Banks.
So, why do banks fail?
In the case of Diamond Bank, they Nose Dived in their profit-making from N28.5 billion in 2013 to around N9BILLION IN 2017.
Diamond Bank Failed because of the following reasons.
Bad Leadership and poor risk management: The bank loaned out money, in the interest of their goal to become the largest retail bank in Nigeria. With more loans going to the Oil & Gas sector, and less to the corporate borrowers, the fall in oil prices in 2015 and 2016 really affected them.
Diamond Bank Also had a weak governance structure, chaired by Uzoma Dozie. It is believed that the bank did not place the right emphasis on risk management. In 2016, the bank made profits less than N5billion and a loss of N9billion the next year, many board members lost interest in the Bank’s then CEO Uzoma Dozie.
The Board Lacked Independence:
The Dozie Family, owned 14% of the banks share. Directly, they owned 5% and indirectly controlled 9% through their investment firm, Kunoch Ltd. Carlyle Fund controlled 18%, making them the highest shareholders. Board independence is important in management because it makes it more likely for rigorous questioning of policies and agreement, reducing the risk of rubber-stamping most management decisions.