Finance Minister recommends establishment of Council of financial regulators

By Peter Egwuatu
The Minister of Finance, Mr. Olusegun O. Aganga has recommended the establishment of a council of Nigeria Financial System Regulators comprising all the key current financial regulators.

He made this recommendation at the 2010 Lagos Bankers’ Nite organised by the Chartered Institute of Bankers of Nigeria (CIBN) Lagos Branch.

According to him, “ the two overarching regulators, the Central Bank of Nigeria (CBN) and the Federal  Ministry of Finance should oversee this Council which shall, at the macro-level, oversee the affairs of the financial system, but will not necessarily be involved in micro prudential regulation.”

He emphasized that the CBN would continue to be responsible for the prudential and risk management for the banking system in closer coordination with the other regulators, Nigeria Deposit Insurance Corporation (NDIC), National Insurance Commission ( NAICOM) and Pension Commission ( PENCOM) where financial institutions provide multiple services, however there will be clear and defined roles and responsibilities for each regulatory body in this role”.

Continuing he said, “ a  new regulator should be established that will be responsible for: Market confidence and integrity, Good corporate governance, Consumer protection, Investor protection, Ethics and professionalism, Public awareness, and Reduction in financial crime

While addressing the bankers, he stressed that  the pillars of the proposed regulatory reform which he believe will not only guarantee the maintenance of an enduring sound, stable and safe financial system, but will also maximize the system’s economies of scale and scope.

“Without going into a great amount of detail, the proposal may call for the consolidation of several of the subsisting regulatory agencies. However, the CBN and the Federal Ministry of Finance shall continue to oversee the performance of the financial system at the macro level. A greater commitment to increasing consumer protection would be particularly welcomed. We want to see responsible lending in the banking and mortgage sectors.

At a regulatory level, we want to see intelligent regulation with poorly performing firms, made to play by the rules, an efficient system of redress for customers and timely and appropriate compensation for them where necessary” he noted.

Aganga, however also call for capacity enhancement for the regulatory institutions, saying “ We must also focus on increasing and improving the capacity of our regulators in order to facilitate a stronger enforcement regime.

This could mean the secondment of seasoned, capable, professionals from the banks or financial sector, to the regulatory agencies as well as the use of compliance officers and consultants within both the regulatory bodies and financial institutions themselves. In addition to this, we must look at strengthening sanctions for market abuse and breaches of regulatory rules, which may include specific actions against key officers/chief executive officers.

The financial industry can also regulate itself by aiding regulators through self reporting, which would entail maintaining a breaches register, with stronger sanctions for failure to report.”

The Minister further stressed that the task of reforming Nigeria’s financial regulatory system is a collective responsibility- involving all the stake holders including policymakers, market operators and the academia.

“I hope that my address will kick-start the long awaited public debate on how best to reform our currently sub-optimal financial regulatory system, which is generally acknowledged not to be working to capacity.” he added