Senate insists on banks' grouping, NDIC warns on reforms
From Alifa Daniel (Abuja),
Mathias Okwe and
Bukky Olajide (Enugu)
THE bill to classify banks into mega, medium and small outfits on the basis of their capital base has entered the second reading at the Senate.
Consequently, opponents and supporters of the new N25 billion minimum capital base will next week present their positions on the matter at the Senate Hearing room at the National Assembly complex, Abuja.
Debate on the two bills to amend the Central Bank of Nigeria (Amendment) Act and the Banking and Other Financial Institutions Act (BOFIA) were initiated by the Senate to allow a level playing ground for the banks.
Under the BOFIA Bill, the Senate puts the capital base for mega banks at N25 billion, medium (N10 billion) and small outfits (N5 billion).
At an earlier consultative session, the CBN, through its Governor, Prof. Charles Soludo, had stuck to its guns while other stakeholders represented by Chartered Institute of Bankers of Nigeria (CIBN), Association of Bank Directors opposed policy.
Any hope of support for the CBN's stance dimmed in the Senate yesterday as the amendments to the two laws passed through its second reading successfully.
The only senator, Bob Itak Ekarika, who attempted to speak against certain aspects of the BOFIA Bill had his voice drowned by interruptions from his colleagues, who disagreed with him.
An amendment to Section 9 (1) of the CBN Act reads: "The governors and deputy governors shall be persons of recognised financial experience and shall be appointed by the President subject to confirmation by the Senate by instrument under the public seal and on such terms and conditions as may set out in their respective letters of appointment."
Persuading the Senate to allow the bills to sail to their second reading, Senator Ambuno Zik Sunday, the chairman of the committee on banking, insurance and other financial institutions, said that the CBN ought to be independent and autonomous.
He, however, agreed with the apex bank that there was need for an increase in the capital base of banks but insisted there was need to categorise them as obtained in other countries.
Senator Jonathan Zwingina cautioned against the tendency of government taking advantage of the ongoing reform to foist untested policies on the country, especially in the banking sector.
The Nigeria Deposit Insurance Corporation (NDIC) has equally warned that the banking sector reform may cause more problems if it was not carefully handled.
It, therefore, charged the CBN, which is implementing the plan, to be ready now more than ever before to salvage the situation and avoid a more costly damage to the system.
The NDIC Assistant Director of Research, Dr. Jacob Ade Afolabi, pointed out for instance that the recent CBN's decision to withdraw the pubic sector funds put at N74.6 billion held in commercial banks dealt a major blow to the system as well as precipitated a crisis.
In a paper titled: "Implications of Consolidation of the Banking Industry for the Nigerian Banking Sector," at the on-going three-day workshop for business editors and finance correspondents organised by the NDIC in Enugu, Afolabi noted that "the new minimum requirement of N25 billion, which prompted the on-going exercise, has led to panic in the inter-bank market."
"Following the new policy direction of the CBN, particularly as it relates to consolidation and increase in bank's capital base, the big players withdraw their funds in the market with the attendant liquidity problem for the marginal banks.
"The situation has been compounded by the phased withdrawal of public sector funds from banks. Currently, some banks have been thrown out of the clearing system as a result of their weak liquidity position," he said.
The Director of Banking Supervision, Mr. Ignatius Imala, said that the structural weakness of the banking system prompted the apex bank to embark on the current reform of the sector.
Imala observed that the development had hindered the performance of the industry's development role in the economy and seriously curtailed the achievement of government's objectives of ensuring price stability, economic growth and high employment level.
The bank chief observed that while the regulators had successfully managed to prevent a systemic crisis in the industry, the supervisory authorities' efforts had been hindered by a number of issues, which include weak corporate governance practices.`
