Kunle Aderinokun
20 August 2008
Abuja — Nigeria Deposit Insurance Corporation (NDIC) has recommended a downward review of the single obligor limit, which is at present pegged at 20 per cent of shareholders' fund, given the huge shareholders' funds capacity of many of the consolidated banks.
Single obligor limit is the maximum amount a bank is allowed to lend a single borrower or an individual in relation to the total shareholders' fund of that bank.
The recommendation came as the Central Bank of Nigeria (CBN) unveiled the timeframe for the implementation of the Financial Sector Strategy (FSS) 2020, which is designed to help transform Nigeria into an international financial centre by 2020.
CBN revealed that the implementation of the strategy had been divided into three phases -- one (June 2007- December 2012); two (January 2013- December 2016) and three (January 2017-December 2020).
Addressing participants yesterday in Abuja at the opening of the Fourth Conference of Regulators and External Auditors of Financial Institutions, Managing Director of NDIC, Mr. Ganiyu Ogunleye, said the prevailing single obligor limit could provoke unintended concentration of risk.
"In the context of risk management, I believe the present single obligor limit of 20 per cent of shareholders' fund unimpaired losses requires a downward review. This is necessary in view of the huge shareholders' funds of many of our consolidated banks. The present limit can induce unintended concentration of risk," he said.
Ogunleye pointed out that ensuring sound governance of financial institutions and effective risk management by both the regulators and the universal banks were part of the challenges being faced by regulators.
In this regard, he advised, "the universal banks are encouraged to adhere strictly to the code of corporate governance issued post-consolidation as well as international best practices."
According to him, "They should also put in place sound risk management framework as a matter of priority, while the Central Bank and the Nigeria Deposit Insurance Corporation have designed a risk-based supervisory framework. Its successful implementation requires the existence of sound risk management structures in banks."
Declaring the conference open, CBN Governor, Prof. Chukwuma Soludo, noted that in a bid to ensure the achievement of the desired targets within the planned timeframe, the apex bank had adopted the FSS 2020 blueprint.
The blueprint, he disclosed, would be used to "implement and transform the financial sector into a growth catalyst of the economy and engineer Nigeria's evolution into an international financial centre".
Soludo, who was represented by CBN's Deputy Governor, Operations, Mr. Suleiman Barau, said: "The strategy entails strengthening the domestic financial markets, which will then be used to drive overall economic growth."
According to him, "The second prong of the strategy focuses on integration with the external financial markets by targeting initiatives that will enable the financial sector to reinforce the expansion of our export base.
"To this end, we plan to start with our regional bloc and then expand to other global economic blocs.
"The third prong of the FSS focuses on engineering Nigeria's evolution into an international financial centre. We intend to become an international financial centre in the medium to long-term by leveraging on our areas of strength as a key factor."
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