Banking Laws: CBN Moves Against Violators
Vows to publish their names in national dailies
From Ayodele Aminu in Lagos and Cletus Akwaya in Abuja
The Central Bank of Nigeria (CBN) has said it would commence publication of the names of banks that contravene banking laws in the national dailies.
Already, a memo on the plan of the apex bank entitled: "The Desirability of CBN To Commence Publishing The Names Of Banks That Contravene The Provisions Of BOFIA And Other Banking Laws In The Nigerian National Dallies," has been sent to managing directors/chief executives of banks for their comments.
Justifying the need for the publication, the memo from the CBN Banking Supervision Department, "observed that some banks have continued to exhibit unethical and unlawful behaviour notwithstanding the penalties imposed."
"It is therefore, our opinion that the various measures adopted have not brought about the desired salutary effects because the depositors who have the largest stake in the banks are usually unaware of the various contraventions of the laws perpetrated by their banks and the resultant penalties," it stated.
Given this scenario, the CBN noted, "that the time is ripe not only to publish contraventions but also to disclose all material and significant breaches that have been observed and discussed with the management of banks."
Such publication, which would be on quarterly basis, according to the banking watchdog, "will align the CBN with its primary function of protecting depositors, rather than the present public perception of the CBN, as protecting the banks."
The publications, the apex bank maintained, will among others:
Promote market discipline: A critical goal of the supervisor is the enhancement of market discipline by providing market participants with adequate, timely, and accurate information for making decisions. This is the core of the 3rd pillar of the new Basel Capital Accord. Publication of such contraventions, it is believed, will further enhance market discipline in the system.
Discourage unethical practices: Publishing the names of banks that default will discourage the management of banks from engaging in unethical and unprofessional activities.
Serve as a deterrent: The publication of erring banks has deterrent effects as no bank can afford to experience the public perceptions of such disclosure.
Enhance confidence: Publication will boost the public confidence in the industry, as the public knows that the supervisors will quickly alert them when their banks err.
Provide additional disclosure: Publication will serve as an additional disclosure as the details of the contraventions are already contained in the audited accounts, which is also a public document but limited in circulation. Publication will therefore target the public.
Serve as a reference for supervisory actions: Publication will serve as a reference for cataloguing supervisory actions on a particular bank.
Over the years, the public had blamed the supervisors for watching banks collapse without any warning signals to the public. A case in point is the liquidated Savannah Bank Plc, which was not known to the public to have contravened any provisions of BOFIA before its licence was suddenly revoked.
The CBN therefore emphasized that "it believes that publication will show that the CBN is not unduly protecting the banks to the detriment of the depositors and the general public."
Recently, the apex bank also directed banks to include details of their exposures to insiders as notes to the accounts. These are some of the efforts aimed at ensuring full disclosure and transparency in the conduct of the affairs of banks. Despite all these measures banks have remained adamant.
Just last Tuesday, Governor of the CBN, Professor Charles Soludo, had in a meeting with the Bankers' Committee in Abuja directed banks to raise their capital base from N2 billion to N25 billion by December 2005. This move, Soludo explained, is to strengthen banks and protect depositors.
Meanwhile, the Revenue Mobilisation Allocation and Fiscal Commission (RMFAC) has threatened to deal with banks which delay in remitting to the CBN money collected on behalf of the federal revenue agencies.
Chairman of Non-Oil Sector Committee of the RMAFC, Alhaji Ahmad Iliyasu, who gave the warning during a tour of Customs formations in the South-west zone, pointed out that late and irregular remittance of revenue proceeds to the CBN in a fiscal year could affect budget implementation.
Iliyasu cited the example of an unnamed bank that had retained billions of Naira from oil revenue without remitting it to the Central Bank of Nigeria. He said defaulting banks would soon be made to account for the funds they had collected on behalf of government agencies and may be blacklisted from collection of revenue on behalf of government agencies.
He said the visit of the Committee to revenue agencies including the formation and offices of Nigerian Customs Service and Federal Inland Revenue Service was to find a way of boosting non-oil revenues by blocking loopholes through an assessment of revenue generation and collection machinery of the agencies concerned.
While assessing the mode of operations of the Customs service and its financial dealings with operators, Iliyasu urged the commands to ensure that everyone adhere to laid down procedures by conducting regular reconciliation of accounts so that defaulters would be reprimanded.
He however, regretted the physical condition of some of the customs formations, which he described as pathetic. He, however, assured that the commission would take up the issue with relevant authorities for better funding of the services to motivate servicemen and boost their morale for efficient and effective revenue generation.
During the visits, the Committee noted the problems bedeviling the customs service, which included poor electricity supply, insufficient arms to check smugglers who are always fully armed at border areas, meagre monthly allocation that do not meet logistics requirement, lack of proper computerization and online service to ensure efficiency and speed in operations.
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