ON-GOING BANKING SECTOR REFORM IN NIGERIAN ECONOMY

It was against this background that the CBN moved decisively to strengthen the industry, protect depositors’ and creditors’ funds, safeguard the integrity of the industry and restore public confidence. In that regard, the CBN replaced the chief executives/executives directors of the banks identified as the source of instability in the industry and injected the sum of N620.0 billion into the banks in an effort to prevent a systemic crisis. Arrangements were also made to recover non-performing loans from banks‘debtors, while guaranteeing all foreign credits and correspondent banking commitments of the

affected banks. Furthermore, the Bank proposed the establishment of the Asset Management Corporation of Nigerian (AMCON). 

The AMCON Bill has already been passed by the National Assembly and signed into law by the President. The AMCON as a resolution vehicle is expected to soak the toxic assets of troubled banks. Members of the Board of Directors of AMCON have also been cleared by the Senate and inaugurated. The CBN is also collaborating with the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) to reduce the cost of transactions particularly bond issuance so as to diversity funding sources away from banks, as well as attract more foreign portfolio investors into the sector. Efforts are also being intensified towards strengthening regulatory and supervisory framework and enhancing the monitoring of the operations of the Deposit Money Banks (DMBs) to ensure that they remain safe, sound and healthy.

To further engender public confidence in the banking system and enhance customer protection, the CBN established the Consumer and Financial Protection Division to provide a platform through which consumers can seek redress. In the first three months of its operation, about 600 consumer complaints were received by the Division which was a manifestation of the absence of an effective consumer complaints resolution mechanism in banks. The CBN has also issued a directive to banks to establish Customer Help Desks at their head offices and branches. In addition, the CBN has commenced a comprehensive review of the Guide to Bank Charges with a view to making the charges realistic and consumer-friendly. 

Furthermore, the Consumer and Financial Protection Division is expected to commence a programme of consumer education and enlightenment and is also collaborating with the Consumer Protection Council on the review of the Consumer Protection Council Act No. 66 of 1992, to regulate and enforce discipline in the market. The CBN has taken steps to integrate the banking system into the global best practices in financial reporting and disclosure through the adoption of the international Financial reporting Standards (IFRS) in the Nigerian Banking Sector by end-2010. This is expected to enhance market discipline and reduce uncertainties, which limit the risk of unwarranted contagion. The CBN is also closely collaborating with other stakeholders like the Nigerian Accounting Standard Board (NASB), Federal Ministry of Finance (FMF), NDIC, SEC, NAICOM, PENCOM, Federal Inland Revenue Service (FIRS), and the Institute of Chartered Accountant of Nigerian (ICAN), among others, towards ensuring a seamless adoption of IFRS in the Nigerian banking sector by 2012. These efforts are being pursued under the aegis of the Roadmap Committee of Stakeholders on the Adoption of IFRS in Nigeria inaugurated by the NASB and facilitated by the World Bank. 

The universal banking (UB) model adopted in 2001, allowed banks to diversify into non-bank financial businesses. Following the consolidation programme, banks became awash with capital, which was deployed to multiples of financial services. In effect, the laudable objectives of the UB Model were abused by operators, with banks operating as financial supermarkets to the detriment of core banking practices. To address the observed challenges, the CBN is reviewing the UB Model with a view to refocusing banks to their core mandate. Under the new model, banks would not be allowed to invest in non-bank subsidiaries, while banks with such investments would be required to either divest or spin-off the businesses to holding companies that will be licensed by the CBN as other financial institutions. The three classes of deposit money banks being proposed are: International banks, National banks and Regional banks.