False Returns: CBN Moves Against Banks
By Ayodele Aminu and Kunle Aderinokun in Enugu
In a bid to stem the spate of falsification of bank's returns to regulatory authorities, the Central Bank of Nigeria (CBN) has developed a software (electronic Financial Analysis and Surveillance System (e-FASS) to correct this anomaly which has continued to militate against supervisory process.
CBN director of banking supervision, Mr. Ignatius Imala made this known yesterday in Enugu at a workshop organized by the Nigeria Deposit Insurance Corporation (NDIC) for financial journalists.
Imala who spoke on "The challenges facing the regulatory authorities in the supervision of the banking industry in Nigeria", said the software which is an upgrade of the Bank Analysis System (BAS) jointly introduced by the CBN and NDIC would be ready before the end of the year.
"The software is currently being upgraded such that banks would render such returns on-line and the regulatory authorities would be directly liked in order to have unimpeded daily access to the database of the reporting institutions.
"The upgraded software would be more robust, and would help in minimizing false reporting since a daily appraisal of a bank's financials would enable the regulatory authorities to have an upgraded knowledge of the financial of a bank. The software has also been expanded to cover other non-bank financial institutions," he said.
When deployed, the application he said, would improve the quality and integrity of information available to the regulators.
"The timeliness of information generation and the absence of the incentives to manipulate data would significantly improve the effectiveness of the supervisory process," he added.
The CBN director listed the challenges facing banking supervision to include weak corporate practices which have to do with falsification of returns/reports, high volume of delinquent insider related credit, inadequate representation of non-executive director on the board as well as formulation of self-seeking policies.
Other challenges according to Imala include weak capital base of banks which narrows interface with other sectors of the economy, poor credit administration, paucity of executive capacity in the industry, prolonged judicial process as well as difficulties in the reviewing of supervisory legal framework.
Noting that these challenges are formidable, he maintained that the CBN has continued to formulate policies, issue guidelines/circulars and adopt strategies and measures to ensure the stability and soundness of the banking system in Nigeria.
Imala listed some of such measures adopted to include banks' reporting software, the Credit Risk Management System (CRMS) - a database it established to monitor credit status of borrowers in the system, code of conduct for directors, know your customer manual, appointment to top management/board directors in banks, collaboration with other regulators of the financial system, adoption of international best practices, contingency planning for systemic distress and crises as well as recapitalization of weak banks.
Speaking on the reform agenda of the CBN, he stressed that the structural weakness of the banking system, which has hindered the performance of its developmental role in the economy and seriously curtailed the achievement of government's objectives of ensuring a price stability, economic growth and high employment level prompted the CBN to embark on the current reform of the banking sector.
He emphasised that the regulatory authorities are constantly retooling their approach to supervisory roles in order to focus and channel more supervisory resources to the critical areas of bank's operations (their risk assets).
"The CBN and other stakeholders are also working towards the establishing of an Asset Management Company (AMC). This is expected to be an interventionist agency, as in other parts of the globe, to acquire the risk assets of distressed banks in order to free such banks from provisioning requirements inherent in the impairment of such assets," he stated.
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