By Tony Obiechina, Abuja
The former Group Managing Director of Access Bank Plc, Mr Aigboje Aig-Imoukhuede, has commended the Nigeria Deposit Insurance Corporation, NDIC for coping with the distress in the banking sector in the past 30 years of its operations.
According to him, “by initiating aggressive recovery actions, the NDIC demonstrated to people that there would be consequences for bad behaviour, and the tone set by the regulator sent a clear signal that governance and risk management would have to be improved”.
Aig-Imoukhuede who delivered the NDIC 30th Anniversary Lecture on “Emerging Risks and Corporate Governance Issues in Banking” in Abuja on Monday, said, “Our banking system is a huge highly flammable asset which is unfortunately in close proximity to several challenges capable of igniting a fire and we must take proactive steps to insulate this asset from the risks around us”.
He challenged the banking sector regulatory authorities to devise appropriate regulatory models that will cope with the risks associated with expanding scope of Nigerian banks beyond 2020.
The Former Group CEO also tasked regulators to be proactive instead of reactionary to bank failures as the current capacity of the regulators could hardly cope in event of any bank failure.
“I do not believe that some of our policies are helping. We have to ease monetary policy and pro actively manage the uncertainty around foreign exchange risk. We cannot bury our heads in the sand. We must stress test and ensure effective contingency planning. We must be proactive not reactive.
“Banking has not changed, but the scale has increased astronomically. At the same time bank operations have gone retail and some banks have over 20 million customers, which creates new avenues for operational risks. The volume of customers and transactions has gone up hugely.
“My concern now is, what happens if there is bank operational failure? A run on a bank can no longer be controlled using traditional means if people can move money electronically or with USSD, what is our response to systemic risk of an electronic/digital dimension.
“The regulatory capacity to oversee our sector was built to address the risks of the sector as we saw them in 2008. We have to evolve that capacity to meet the needs of 2020 We need to bring in new risk management talent in the banks as an urgent imperative to suit the evolving nature of banking, the stakes have gone up and we must respond appropriately.”
He recalled that the turbulence and systemic weaknesses noticed in the Nigerian bank sector over the last 15 years, could be linked very clearly, to failures of risk management.
He said while the country had regulatory interventions to partially address the fall out of poor risk management , “we still operate a system that is fragile from a risk quality perspective”.
“The negative effects of capital controls and multiple exchange rates on Nigerian corporates has not been resolved and provides the backdrop for our current macro prudential challenges, and today having not put to bed several risk issues from 2008 today we face the carryover plus a number of new risks.
“With the effect that in 3 years’ time a small Nigerian deposit money bank is a ₦1 trillion bank and a big bank is a ₦10 trillion bank, these are not small sums. In fact, the biggest banks will be the same size as the national budget even despite the TSA policy!
“AMCON today has liabilities of approximately ₦5 trillion, which represent what was about 30% of the size of the banking sector when it was created. We now have banks that are more than AMCON’s size so imagine what it would take to rescue the system today? Is it even within the capability of the nation to do so? I don’t think so, and that means the stakes are higher today, and so the level of risk management has to be commensurate”, he added.
The Vice President, Prof. Yemi Osinbajo, who was the Special Guest of Honour, unveiled the book titled: “Thirty Years of Deposit Insurance”.
He applauded the NDIC for living up to its mandates and remaining focused in ensuring financial stability in the country.
Earlier, the NDIC Managing Director, Umaru Ibrahim, while reeling out the achievements of the corporation, said some challenges experienced since 2006 have necessitated the need to review the NDIC Act by the National Assembly.
The Ooni of Ife, His Imperial Majesty, Oba Adeyeye Enitan Ogunwusi (Ojaja II) while applauding NDIC giant strides, called for increase in deposit insurance above N500,000 to take care of those with huge deposits in case of Bank failure.
