The Central Bank of Nigeria on Wednesday reiterated that it would conduct another round of stress test on Deposit Money Banks in the country before the end of this year.

It had dropped a hint in March last year that a fresh stress test would be conducted on the banks in June of 2011, but this time around, it refused to give a definite time.

The apex bank said the fresh assessment was to prevent a similar crisis situation that led to the near total collapse of most of the banks in 2009.

A stress test refers to the comprehensive capital analysis and review programme that examines the ability of the banks to survive a financial crisis.

Following a stress test on all banks in the country in 2009, the CBN had classified some of them as unhealthy and not having the required capital adequacy ratio to remain in business.

Consequently, the apex bank removed the Managing Directors of five banks, whose situation was deemed as requiring urgent intervention. The affected banks are Intercontinental Bank Plc, Union Bank of Nigeria Plc, Oceanic International Bank Plc, Finbank Plc and Afribank Plc.

It injected N620bn into the affected banks, a development which led to the recapitalisation of some of the DMBs, while those that did not show the capacity to recapitalise were later nationalised.

The Deputy Governor, Financial Systems Stability, CBN, Dr. Kingsley Moghalu, said during a retreat by the Risk Management Association of Nigeria in Lagos on Wednesday, that the fresh stress test would determine the ability of the banks to survive in times of financial crisis.

“As a follow-up to the last stress test conducted in 2009 at the request of the CBN, plans are underway to conduct another round of assessment on commercial banks before end of 2012 as part of the Financial Sector Assessment Programme under a technical assistance programme facility provided by the International Monetary Fund and the World Bank,” he said.

Moghalu noted that the CBN had also strengthened the supervision of offshore Nigerian banks as there was an ongoing cross-border supervisory cooperation and coordination with other jurisdictions where the nation’s banks had presence.

“There is also an evolving effort to set up a forum of Chief Risk Officers of banks to provide a platform to periodically discuss risk issues in individual banks and the industry at large,” he said.

The CBN deputy governor said significant attention must be paid to professionalising risk management education in Nigeria and called for the establishment of an accreditation and assessment system for risk management training providers in the financial services sector.

This, he said, would address issues such as risk identification, types, analysis and measurement; market, economic influences and impact; compliance roles and responsibilities, and lessons from past banking and financial crises.

“Considering the identified skills and capacity gaps and the paramount importance of having in place a sufficient pool of skilled talents and risk professionals to drive and support effective risk management in financial institutions, significant attention should be given to these points,” Moghalu said.

However, the announcement of a fresh stress test for the banks has generated mixed reactions among financial experts, who spoke to our correspondent on Wednesday night.

The Chief Consultant, B. Adedipe Associates Limited, Dr. Biodun Adedipe, said stress tests on banks should be done at regular intervals.

He said, “This is an ongoing thing that the CBN should actually be doing from time to time to prevent the type of crisis we experienced in 2009. If the central banks worldwide had been doing this regularly, we wouldn’t have had such a shock treatment when they eventually did it and there wouldn’t have been a lot of changes to our banking system.”

“For me, I don’t think it is out of place and it should be at regular intervals, not too far from each other.”

The former President, Association of National Accountants of Nigeria, Dr. Samuel Nzekwe, said the CBN was heating up the financial system by making such a pronouncement.

He said, “I have always said it that the CBN’s multiple pronouncements are causing panic in the financial sector.”

Source: Punch/Okechukwu Nnodim