The House of Representatives is proposing a N20 million daily penalty on banks to curb insider abuse and threat of Non-Performing loans to the financial system stability of the country.
Mr Jones Onyereri, Chairman, House Committee on Banking and Currency, told journalists on the sidelines of the ongoing 2018 IMF/World Bank Spring Meetings in Washington DC.
He said that the House was in the process of reviewing the Banks and Other Financial Institutions Act (BOFIA) to include the penalty.
“In the reviewed Act, we propose that penalty be increased to the extent that thinking about committing such infractions will be scary to anybody that intends to do so.
“If you know that you need to pay as much as N20 million every day that you continue to have that infraction, you won’t dare do any of those things.
“So, we are trying to deter them. Increasing the fee will serve as a deterrent,” he said.
Onyereri said that the first public hearing on the proposed review of the BOFIA Act had already been concluded and that in a few weeks, the bill would be ready.
He said that when ready and signed into law, the BOFIA Act would reduce non-performing loans in the country.
‘The issue of non-performing loans is the core reason behind the banking crisis in 2009 and 2010. and that is why the Federal Government introduced the idea of AMCON.
“If the truth be told, I think we are in another worse and grave situation because the current non-performing loans is far beyond the usual threshold and it’s embarrassing, and that is why we have touted the idea of another AMCON II.
“We need to solve that problem, and if you look at what we are doing especially in the House of Representatives, we are amending the Banks and Other Financial Institutions Act to curb as much as is within reasonable limits, the whole idea of non-performing loans,” he said.
Onyereri alleged that the core non-performing loans was largely an act of insider abuse.
“Under the current BOFIA, no bank should give facility in excess of N50, 000 to the directors of a bank and the directors are meant to disclose whichever investment they have in the bank or outside even before becoming directors in the banks.
“But none of this is being followed. They give themselves loans far in excess of the accepted value. So what we have tried to do now is to increase the punitive measure,” he said.
Onyereri added that the House was also working to strengthen the Nigeria Deposit Insurance Corporation to ensure joint supervision by both NDIC and Central Bank to reduce cases of non-performing loans in the banking system.