By Babajide KOMOLAFE
The Central Bank of Nigeria (CBN) has launchedÂ the next phase of banking reforms statingÂ that the mergers and acquisition process of the eight bailed-out banks areÂ at the stage of technical due diligence.Â Â
In a keynote addressÂ Â at the Bussinessday International Conference on banking reforms, CBN Governor, Mallam Sanusi Lamido Sanusi on ThursdayÂ Â gave the outlines of the second phase of the banking reforms.
Reviewing the situation preceding the banking crisis, he said, regulatory shortfallsÂ Â within the CBN and other regulators, host of other problems bordering on poor corporate governance within banks and lack of effective risk management practices contributed to the crisis over and above economic and macro prudential issues observed.
Speaking on the entire reform programme, Mr. Sanusi said â€œthe blue print for the reforming of the Nigerian financial system in the next decade was built around 4 pillarsâ€ which he said in some cases the CBN needed to take the lead, while in others to play key advocacy role.
He outlined the four pillars to include enhancing the quality of banks, establishing financial stability, enabling healthy financial sector evolution and ensuring that the financial sector contributes to real economy.
Mr Sanusi said the reform was meant to encapsulate a holistic set of strategies and initiatives designed to stabilize the banking sector and promote long sustainable growth of the sector and the economy as a whole.Â He outlined the strategies and initiatives to include fixing the problems of the banks, tighter regulation, adoption of risk based supervision, effective consumer protection and reform of the CBN itself.
Others according to Mr. Sanusi include adoption of hybrid monetary policy, new macro prudential rules, control of â€œhotâ€ money, enthronement of directional economic policy and support of capital market development to work as an alternative to bank funding.
The Governor further said that the CBN would work hard to bring about the emergence of a competitive banking industry structure, the required infrastructure, improved cost structure of banks (through cost control), reliable and secure payment systems and reduced informal sector and greater financial inclusion.
Still outlining the strategies and initiatives of the four pillars of the reform, Mr. Sanusi said as part of the CBN effort to ensure that the financial sector contributed to the real economyÂ potential areas for further consideration would include the CBN’s role as economic adviser to the government measuring the relationship between the real economy and the financial sector, the effectiveness of existing development finance institutions, examination of critical issues (e.g power, port, railways etc) for economic development, venture capital and private and public partnership initiatives for Nigeria and pilot programme in directing the financial sectors contribution to the stateâ€™s social economic development.
The Governor concluded with a rehash of the on going reforms regarding resolution for the intervened banks particularly the issue of the establishment of the Asset Management Corporation of Nigeria (AMCON)Â as a recapitalization vehicle to soak the toxic assets of the banks, which he said would soon come on stream , the Merger and Acquisition process said to be at technical due diligence level after obtaining the understanding of stakeholders; capital market issues, industry structure involving categorization of banks, tieringÂ of capital and formulation of licensing guidelines as well as supervision issues culminating into the adoption of risk based and consolidated supervision.