Banks to undergo another stress test before December
Monday, April 19,  2012

• Sanusi

Indications have emerged that commercial banks in the country may be in for another round of shake-up before December 2012. This is as a result of another round of stress test, which the Central Bank of Nigeria (CBN) plans to conduct before the year runs out.

In a keynote address delivered on Wednesday at a retreat for financial officers in Lagos, CBN’s Deputy Governor, Financial System Stability, Dr. Kingsley Moghalu, noted that the planned assessment of banks will serve as a follow-up to the last stress test conducted in 2009.

His words: “Plans are under way to conduct another round of assessments on commercial banks before the end of 2012, as part of a Financial Sector Assessment Program (FSAP) under a technical assistance programme facility provided by the International Monetary Fund (IMF) and World Bank.”
It should be remembered that the last stress test resulted in the sacking of five managing directors of banks for offences that bordered mainly on lax risk management and bad corporate governance practices.

Moghalu remarked that in line with global best practices and as part of the on-going reforms, the CBN has commenced the implementation of risk based supervision of banks in Nigeria. He added that the apex bank is currently in the process of adopting and implementing the Basel 11 and 111 capital accords beginning in December 2012.
“The adoption and implementation of these initiatives will foster better risk management and corporate governance in banks, as well as improved regulatory supervision and industry transparency,” the CBN boss maintained.

Explaining further on the theme: ‘Managing the Challenges of Capacity Building in Risk Management in the Financial Services Industry’, Moghalu said CBN has also strengthened the supervision of off-shore Nigerian banks. There is an on-going cross-border supervisory co-operation and co-ordination with other jurisdictions where Nigerian banks have presence he added.

Outlining other efforts of the central bank aimed at strengthening risk management practices in banks, Moghalu said the bank is evolving a framework for the resolution of banking crisis in future with strong scenario planning. “There is also an evolving effort to set up a forum of Chief Risk Officers (CROs) of banks to provide a platform to periodically discuss risk issues in individual banks and the industry at large.”

Also speaking, the president of Risk Management Association of Nigeria (RIMAN), Dr. Emmanuel Abolo, commended CBN’s effort at repositioning the banking industry; stressing that the issue of capacity building and risk management in Nigeria’s financial landscape, institutions should pay attention to people they employ.

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