Financial market analysts have criticised the latest move by the House of Representatives to set up an independent body that will be responsible for banking supervision in the country.

The experts, who spoke to THISDAY in Lagos, argued that such legislation may distort the system as well as negate the statutory role for creation of the Central Bank of Nigeria (CBN).

Chairman, House of Representatives Committee on Banking and Currency, Hon. Jones Onyereri, had informed THISDAY on Monday that the House was working on a legislation that could strip the CBN of oversight over the banking system and transfer it to an independent body that will be responsible for banking supervision.

The proposed law, according to the lawmaker, would result in the withdrawal of the banking supervisory function of the central bank, leaving it to oversee monetary policies and currency management.

Onyereri had said: "We are trying to take that banking supervisory function away from the CBN because if you look at it closely, especially in Nigeria, most of the problems we have in the industry has to do with supervision. For some reason, we believe that the hands of the central bank are full.

"Creating an independent body will enable the CBN to focus on its mandate of price stability and monetary policy."

But Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said the move by the lawmakers was precipitated, saying that "we cannot come out with a therapy without diagnosis."

"The United Kingdom had done it and has gone full cycle. The European central bank is back to regulating the banks in Europe. However, in the United States, the office of the Controller of Currency is the one that regulates the banks. But I am saying that today, in term of financial services regulation; I do not see that as a major problem. I think that we should focus more in making sure that monetary policy is aligned with the broad macroeconomic objectives of the country, rather than trying to canibalise the powers of the CBN in any form," Rewane said

Also, a Senior Analyst at BGL Securities Limited, Mr. Femi Ademola, described the banking sector as a very sensitive sector in the economy, saying that in most case, it is a direct barometer of the economy.

As a result of this, Ademola stressed the need for the sector to be carefully managed and supervised to the benefit of the economy.

He explained: "The experience of the Nigerian banking sector in recent years has not been very pleasing due to the avoidable disruptions that had been following the appointment of a new CBN Governor. The consolidation exercise of 2005 and the banking reform that started in 2009 created unnecessary disruptions in the economy which perhaps led to the plans by lawmakers to take away the banking supervisory role from the CBN.

"By creating an independent body to oversee banking supervision, Nigeria would have decided to adopt the British system where banking supervision is being handled by the Financial Services Authority (FSA). However, due to the perceived failure of this model to prevent the banking crisis in the UK, the British government has decided to remove banking supervision from the FSA and added to the mandate of the Bank of England (BoE), the same model we currently operate in Nigeria, which also appear to be inadequate here."

Continuing, the financial market analysts pointed out that: "What this means is that even the proposed plans of the lawmakers may not work. However, we wouldn't know until we have tried it. Different economies choose different models as appropriate.

"While I am not a fan of political inference in the financial system, in response to the global financial crisis, most countries are trying out alternative models to determine which is most appropriate. The lawmakers must carry the public along, be receptive to contrary views and conduct adequate investigations before deciding on what model to adopt."

Also, the Managing Director of a leading investment banking firm who pleaded to remain anonymous said the legislation would only lead to duplication of responsibilities, "at a time when federal government is talking about reduction in number of agencies."