‘How to curb incidence of banks’ failure in Nigeria’
As the nation grapples with the issue of Skye Bank takeover, the bank’s shareholders, University Dons, Professors Franklin Ngwu and Uche Uwaleke have prescribed ways to stem the prevalence cases of failed banks in Nigeria.
The duo, who spoke in an interview with The Guardian, argued that urgent steps must be taken to address the anomaly to restore depositors and shareholders confidence in Nigerian banks for improved financial inclusion.
Indeed, there has been increasing level of banks failure in Nigeria in recent times, which has become as source of worry and elicited reactions from various stakeholders.
The occurrence has caused shareholders to lose investment worth billions of naira and subsequently subject them to untold hardship.
For instance in the case of the three nationalized banks: Keystone Bank Limited Mainstreet Bank and Enterprise Bank, investors lost investments estimated at N83 billion, while on the other hand, shareholders may lose whooping N10 billion to SkyeBank takeover.
Specifically, Professor Ngwu called for the harmonisation of the multiple financial regulatory authorities for proper regulatory function.
Professor Ngwu, a Senior Lecturer in Strategy, Corporate Governance and Risk Management, Lagos Business School, Pan Atlantic University proposes that the regulators of financial, other-financial institutions namely Central Bank of Nigeria (CBN), National Insurance Commission (NAICOM), Securities and Exchange Commission (SEC), Nigeria Depository Insurance Corporation (NDIC), National Pension Commission (PENCOM) must form two regulatory bodies.
According to him, the synergy would enhance proper regulation of the industry and reduce the prevalence of failed bank incidence in Nigeria.
He explained that the multiple regulatory functions must be streamlined under prudential regulatory authority and financial conduct authority with the CBN focusing more on monetary policy issues.
‘The synergy is what is called twin pick regulations whereby all the multiple regulators would come together and form two major regulators known as prudential regulatory authority and financial conduct authority.
‘The main challenge we have in the industry, like what happened with Polaris bank is pure conduct issue, the harmonization will allow the conduct authority to properly access the conduct of the different directors and managers of the financial industry.
“Similarly, the prudential regulatory authority will now focus on ensuring that any financial institution will have the required capital adequacy and other prudential requirement before they are allowed to operate in Nigeria.
He continued: “By time the prudential regulation and conduct regulation come together, there is going to be a kind of buying, feedback mechanism, for proper regulation of the industry.
“What it does is that they allow CBN to focus more on monetary policies and liaise with these two regulators to achieve optimum outcome for the banking sector. The present situation whereby you have multiple regulators is repetition of functions.”
Citing UK, USA, South Africa, Australia, New Zeland as emerging and developed markets where similar approach has been adopted, Ngwu noted that their various economies have recorded consistent improvement when compared to their peers.
A Professor of Capital Market and the Head, Banking and Finance Department, Nasarawa State University Keffi, Prof Uche Uwaleke argued that an effective coordinating structure is needed to stem the increasing incidence of failed banks in Nigeria.
“The unique nature of the services provided by financial institutions requires decentralization of the regulatory bodies. This promotes specialization and creates room for a more effective supervision
“Rather than merge them, what is required is an effective coordinating structure. To this end, the Financial System Regulatory Coordinating Committee which is already in place should be strengthened and be made more visible”, he added.