Financial Services
NDIC wants to be involved in the licensing of Nigerian banks
Regulatory stakeholders in the financial sector have been partaking in the adjustments to BOFIA 2004.
The Managing Director of the Nigeria Deposit Insurance Corporation (NDIC), Alhaji Umaru Ibrahim, yesterday called for the involvement of his organisation in the process of licensing new banks in the country.
Ibrahim made the call in Abuja when he appeared before the Senate Committee on Banking, Insurance, and other Financial Institutions. The hearing is part of the processes being undertaken in the ongoing amendment of the Banks and Other Financial Institutions Act (BOFIA) 2004.
More details
According to the News Agency of Nigeria, Ibrahim told the senate committee that the NDIC should be allowed to work in collaboration with the Central Bank of Nigeria (CBN) when a new bank is being licensed. He emphasised that such a collaboration between the NDIC and the CBN would ensure that necessary fits and adequate checks are carried out before banking licenses are issued. It would also help to establish a clearer assessment of the status of financial institutions before licensing them, he stated.
Delineation of roles between the CBN and the NDIC
While commenting on the BOFIA bill, Ibrahim stressed that there is a need to clarify any over-lapping mandate between the CBN and the NDIC in order to avoid ambiguity/misconception. He specifically called for clarification regarding the resolution of failing banks, adding that the NDIC should be recognised as the primary actor in any failing bank’s resolution process. He even offered some clarification by noting that Nigeria’s apex bank only intervenes in the affairs of banks in event of a systemic crisis.
A clear delineation of roles between the NDIC and CBN would strengthen the legal framework of BOFIA 2020, Ibrahim explained.
“In a bid to establish effective legal instruments to secure the safety and stability of the nation’s financial system, there is a need to closely examine enacting laws with a view to harmonising the positions of the NDIC and CBN in the NDIC Act 2006 and the Banks and Other Financial Institutions Act (BOFIA) 2004.
“The bill seems to suggest the option of the appointment of other entities in the liquidation of failed banks. The bill should be amended to reflect the NDIC as the sole liquidator of failed banks based on the Corporation’s core mandate,’’ Ibrahim was quoted to have said.
Speaking further, Ibrahim made the following suggestions
- That the NDIC should seek the approval of the CBN in the implementation of supervision, control, management and distress resolution of banks as reflected in the bill.
- That directors of banks should be held liable for the causes of the failure of their banks if found to be negligent in management decisions.
- That imposition of penalties and persecution of various offenses would serve as a deterrent to officers and directors of banks.
The backstory
Recall that Nairametrics already reported about the Central Bank of Nigeria asking that some adjustments be made to the BOFIA bill. In specific terms, the CBN’s Director in charge of legal services, Kofo Salam-Alada, had pointed out that the new BOFIA bill has ‘inadvertently’ omitted a clause that should normally grant the CBN Governor power to freeze any bank accounts linked to criminals, using a court order. The apex bank asked that this clause be included.
Regulatory stakeholders in the Nigerian financial services sector have been appearing before the Senate Committee on Banking, Insurance, and other Financial Institutions, to partake in the adjustments to BOFIA 2004. Nairametrics understands the BOFIA bill has already passed its second reading at the senate.
Exclusives
CRR: Banks suffer N917.5 billion debits in latest CBN action
The central bank debited Nigerian banks N917.5 billion last week in its latest CRR action.
Nigerian banks suffered a total of N917.5 billion in new CRR debits from the Central Bank of Nigeria. Reliable sources inform Nairalytics Research that the latest debits occurred in the week ended October 23rd, 2020.
The cash reserve requirement is the minimum amount banks are expected to leave retained with the Central Bank of Nigeria from customer deposits. In January, the CRR was increased by 5% to 27.5% by the CBN Monetary Policy Committee (MPC) who explained that the decision was intended to address monetary-induced inflation whilst retaining the benefits from the CBN’s LDR policy.
READ: CBN says 17 banks to restructure over 32,000 loans
CRR Debits for Nigerian Banks.
Nairalytics Data
READ: Union Bank suffers N188 billion in CRR debits as at June 2020
From the data, Zenith Bank topped the list with N285 billion followed by UBA with N160 billion. The rest of the FUGAZ, Access, FBN, and GTB were debited N140 billion, N95 billion, and GTB N55 billion respectively. The FUGAZ also suffered a N1.9 trillion debit in CRR sequesters in the second quarter of 2020 (April – June) alone.
READ: Nigeria’s forex devaluation timeline – 2020
Nigeria’s central bank has since 2019 debited Nigerian banks a chunk of their deposits as part of a mutually inclusive cash reserve requirement (CRR) and Loan to Deposit Ratio policy that is targeted at coercing banks to lend more to the private sector.
READ: CBN reviews minimum interest rates on savings deposit to 1.25%
Last month, Nairametrics reported that the CBN now holds a total of N6.57 trillion in CRR debits from the nation’s top 5 banks a whopping 43% higher than the N4.58 trillion held in March and more than double the N3.5 trillion CRR debits as of December 2020. CRR debits in the third quarter of 2020 will be revealed when banks release their results in the coming days and weeks.
READ: Nigeria’s telecom sector posts double digit growth of 18.1%, manufacturing, others contract
Meffynomincs: CBN under the leadership of Godwin Emefiele has deployed several heterodox policies as it strives to stimulate the economy and manage the exchange rate crisis in the absence of strong fiscal support.
- Interest rates on fixed deposits and money market instruments have fallen to single digits despite the galloping inflation rate.
- Last month, the CBN monetary policy committee admitted it was no longer combating inflation but will direct its policies towards stimulating lending to the private sector hoping this will spur local production.
- This policy has placed banks in the crosshairs with the Apex bank exposing them to CRR debits if they cannot use customer deposits to spur lending.
ENDSARS
#EndSARS: Access Bank announces N50 billion interest-free facility for businesses
Access Bank Nigeria Plc has announced plans to offer N50billion interest-free credit facility to individuals and businesses.
Access Bank Nigeria Plc. has announced N50 billion in support of Nigerians through interest-free loans and grants to support communities, the youths, and micro, small and medium-sized businesses.
READ: Access Bank gets regulatory approval to become a Holding Company
READ: Banks lay-off 2,477 staff during lock-down
This information was disclosed by the bank through its official LinkedIn page.
The bank’s official statement read thus,
“Now more than ever, we remain committed to our purpose of impacting lives positively. In light of the recent occurrences, we will be supporting Nigerian businesses with 50 Billion Naira interest-free loans and grants. Watch this space for more information.”
READ: Access, GTBank, two others pay PWC & EY N1.5 billion as Audit fees in H1 2020
Why it matters
The impact of the pandemic, coupled with the hijacked #EndSARS protests that led to the looting of businesses and destruction of properties has thrown so many Nigerians into debts.
READ: $70 billion per annum will be needed to tackle pandemic induced poverty – World Bank
READ: WTO DG: US, EU divided over Nigeria’s Okonjo-Iweala and South Korea’s Yoo
This show of support from Access Bank will help alleviate and stimulate economic activities, as well as produce many positive multiplier effects on the economy.
READ: #EndSARS: Popular hacking group, Anonymous allegedly hacks Nigerian Govt. websites
Financial Services
CBN reviews appointment requirements for CCOs in Banks
The CBN has reviewed the appointment criteria for CCOs in Merchant Banks and Regional Banks.
The Central Bank of Nigeria (CBN) has reviewed the appointment criteria for Chief Compliance Officers in Merchant Banks and Regional Banks (Commercial and specialized).
This is according to a circular issued by the apex bank dated October 9, 2020, and signed by its Director of Financial Policy and Regulation Department, Kevin Amugo.
READ: CBN has rolled out new anti money laundering penalties that should get any banker worried
According to the latest notice, Merchant banks and Regional banks are hereby granted dispensation to appoint CCOs on a grade not below an Assistant General Managers. However, the CCOs will report directly to the ECO of the financial institutions who have sole responsibility for compliance matters in the bank.
READ: CBN to “reduce” savings rate to 1% declare OMO bills as “Poison”
Backstory
This latest action by the CBN is the sequel to consultations and engagement with stakeholders emanating from its earlier circular referenced FPR/DIR/GEN/CIR/06/004 of September 28, 2016, in which the tentative requirements for Executive Compliance Officers and Chief Compliance Officers of deposit money banks were mooted.
(READ MORE:CBN moves to ring-fence Disco collections)
Meanwhile, the requirements and responsibilities of Executive Compliance Officers remain as earlier communicated in the circular dated 28 September 2016.
A part of the recent circular signed by Mr. Kevin read thus,
READ: CBN grants approval for banks to debit accounts of loan defaulters
“Further to the circular referenced FPR/DIR/GEN/CIR/06/004 of 28 September 2016 on the appointment of Executive Compliance Officers (ECO) and Chief Compliance Officers (CCO) of deposit money banks, the CBN has, after due considerations and presentations by stakeholders on the size, structure, operation, and dynamics of classes of operators in the sectors reviewed the requirements for the appointment of Chief Compliance Officers.”
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