CBN Plans Another Stress Test for Banks by June

16 Mar 2012

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CBN Governor, Mallam Sanusi

By Obinna Chima

In a move to avert a repeat of the crisis that affected the banking sector in 2009, the Central Bank of Nigeria (CBN) Thursday announced plans to conduct another round of stress test on commercial banks before the end of the second quarter of 2012.

Special Adviser to the CBN Governor and Director of Risk Management, Mrs. ‘Folakemi Fatogbe, made this known at the inaugural West African Risk Management conference organised by London-based Moody’s Analytics’ in Lagos. Fatogbe was the keynote speaker.

According to her, commercial banks have already been informed of the plans by the regulator.

The CBN had, following a stress test on banks in 2009, declared some banks unhealthy and deficient of the required capital to remain in business.

The regulator then fired the chief executive officers of the affected banks and injected N620 billion into them. This led to the recapitalisation of some of the commercial banks, while those that did not show the capacity to recapitalise were nationalised.

Fatogbe explained: “We are going to do the next round of banks’ stress testing, at least by next quarter. We have changed the way we used to supervise institutions. It is no longer a desk job and compliance-based, but now we have something that is much more dynamic and investigative, much more proactive and also in line with best practice.

“We have also strengthened supervision of off-shore Nigerian banks. We are doing a lot of work with our colleagues in Ghana and other countries where we have Nigerian banks.”

She further revealed that in order to deepen the Nigerian financial market, the apex bank had presented four bills to the National Assembly.

These bills are the electronic transaction bill, to establish a financial ombudsman bill; alternative dispute resolution regulatory commission; the establishment of the Nigerian international finance centre; and the amendment of the Land Use Act.

The CBN official added: “We are also having meetings with Chief Risk Officers (CROs) of banks. We normally have that meeting with the governor and deputy governors in attendance. It is basically to gauge the understanding of the CROs on the risk issues within their institutions.

“Another thing that we plan to do, which I got permission from the last Bankers’ Committee, is to set up a CROs’ forum. It would be similar to what we have at the Bankers’ Committee level. So in our first meeting in April, we will be looking at some of the data quality issues.”

Fatogbe added: “We basically think that the storm that started in 2009 has calmed down. It is a continuous process because it is not one that can be over like that. For us at the CBN, we are working in partnership with the industry and we are looking at ways for continuous improvement.

“We feel there is a lot of room for improvement on risk management; we are also working on Basel 11, Basel 111, International Financial Reporting Standard (IFRS) and we are looking at issues of capacity building. Adequate capital is not the answer for everything. You can have adequate capital, which can easily be frittered away if there is no corporate governance.”

Tags: News, Nigeria, Featured, CBN, Stress Test, Banks

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  • I had always thought that Sanusi Lamido Sanusi is a man of integrity but how UBA ans Access Bank continue in business amazes me. You do need a stress test to know that UBA and Access Bank are dead banks that should not continue

    From: Ken Mani

    Posted: 3 years ago

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  • As far as I am concerned, this advanced info given to banks is to allow them window-dress their books which is unethical on the part of CBN. In 2009, CBN did not give advanced notice to the so- called interved banks before they conducted the stress test. This confirms the speculations that there are sacred cows among the banks and that CBN has been shielding some of them. The Conduct of CBN as a financial regulator under the present Governor does not show transparency and calls to question the capacity of the apex bank to continue with the lopsided financial industry tranformation which is only intended to show that First Bank, from where he moved to CBN is the only solid bank in Nigeria. Nigerians will know the truth one day.

    From: BEN

    Posted: 3 years ago

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