February 21 2011

John Omachonu

There is palpable apprehension in the banking industry as the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) commence risk assessment of the banks, BusinessDay investigations have revealed.

The special examination, akin to the 2009 one which led to the exit of chief executives of eight banks for various banking infringements, is to ascertain the level of banks’ compliance with provisioning for their assets.

The exercise, which result is expected to be released next month with the accompanying sanctions, will concentrate on risk management, financial strength and level of compliance with the new liquidity and cash reserve ratio recently introduced by the apex bank.

With the benefit of hindsight, some of the potential culprits, particularly CBN appointed chief executives, have started pulling strings to ensure that they complete their tenure, which ends August and October this year respectively.

Further investigations revealed that parts of the report of the examination will jolt the regulators, as findings revealed gross abuse of corporate governance principles.

Indeed, the CBN is believed to have summoned some of the chief executives to Abuja mid last week to ascertain the veracity of the report and possibly hear them out on one-on-one basis before necessary actions are taken.

“The NDIC/CBN joint team are in all 24 banks for risk assessment of the banks for the purpose of provisioning and the report is not even ready because the assignment is yet to be concluded”, Abdullahi Mohammed, CBN’s spokesman told Business Day.

The exercise is coming on the heels of CBN admonishing bankers for lacking requisite qualifications to cope with risk management requirements in their institutions.

“The level of risk management education of most bankers is still well below desired levels, and sustained education of directors, managers and staff of banks in risk management and risk governance remains necessary. Too many bankers still conflate avoidance of lending to all but a few blue-chip companies with risk management,”

Kingsley Moghalu, Deputy Governor, CBN told his audience at a conference on risk governance for boards of directors and senior managers in Lagos on Wednesday.

Though the CBN claimed that the exercise was ‘routine’, further investigations revealed the action was more as a result of a series of petitions and complaints from both the shareholders and some staff of the banks.

Consequently, some of the chief executives, particularly of the rescued banks, were believed to have given up and are awaiting any action from the apex bank. But some of them are encouraged by the fact that the CBN may not want to rock the boat now, considering the negative consequences it could have on the reform programme.

“Rumours have been rife about the health of some banks, and I think the reasonable thing to do is for CBN to ascertain, as continuing to defend the banks on their health condition may not assuage the disturbed investing public. The essence is to avert what happened in 2009,” one of the sources said.

CBN had, on January 7, refuted claims that it was going to liquidate Oceanic, Intercontinental and Unity banks because of alleged weaknesses observed in them.

SOURCE: BUSINESSDAY