By Babajide Komolafe & Michael Eboh
The Central Bank of Nigeria (CBN) has said that it would soon  introduce measures to  regulate    regional expansion of banks as well as remuneration and bonuses of  executives officers Mr. Charles Akoroda, Deputy Director, Banking Supervision Department of the CBN said in Kaduna, “In line with the Basle Committee’s core principles, the cross border subsidiaries of our banks will also be supervised on a consolidated basis. This requires cooperation and information exchange arrangements between home and external supervisors.

“We would be establishing Memorandum of Understanding (MOU) with supervisors in countries where our banks currently operate to facilitate regular exchange of information. Going forward, we would not allow our banks to open shop in any country with which we have not established such an MoU.”

“We have resolved to start regulating remunerations and bonuses of banks Managing Directors. In the course of the audit, we found out that many of the banks’ executives are receiving unnecessarily high pay and bonuses, jeopardising the health of the banks.

Speaking at the annual workshop  for Finance Correspondents organised by the Corporation, he said,  “Remunerations, bonuses and other compensation should provide incentives for management and employees at all levels to behave in ways that promote long term health of the institution.

“Certainly, one of the important fallout of the global financial crisis and, indeed the audit review of our banks is that the structure of compensation and its effect on risk taking is a safety and soundness issue. The present structure of remuneration/bonuses of banks which is characterised by ‘excessive short-termisim’ demonstrates a disconnect between incentives to staff and prudent risk management. Risk management, remuneration and incentives must be linked.”

Akoroda also announced that as parts of plans towards the pursuit of consolidated and cross-border supervision, the CBN would, henceforth, bar banks from opening branches in countries which with which it has no Memorandum of Understanding (MoU). He noted that this action becomes imperative following the numerous infractions perpetuated by some banks with the aid of the subsidiaries, which are not within the regulatory purview of the CBN.

He said, “From the reports of the joint examination, the existence of regulatory arbitrage that enabled the banks to escape supervision by channelling huge resources to their subsidiaries that were outside the supervisory purview of the CBN. Banks would be subject to robust framework of consolidated supervision.

This will enable the risks which the operations of each of the component entities in the group could portend to the whole group to be unearthed and relevant stakeholders alerted to take proactive remedial actions before such risks crystallise.