Banks heading for trouble, says NDIC

The Nigerian Deposit Insurance Corporation (NDIC) has said that some financial institutions in the country may encounter sudden challenges as a result of their poor governance culture and risk control practices.

NDIC Managing Director/Chief Executive Officer, Alhaji Umaru Ibrahim also hinted that some banks had been playing around avoidable crisis which they may not recover from so soon.

He spoke at the 15th National annual conference/AGM of the Risk Managers Association of Nigeria (RIMAN) while delivering a lecture on the theme “Governance and Risk Management: The way forward”.

Ibrahim who attributed the recent global financial crisis to a weak corporate governance and inability to effectively manage surfaced risk noted that some banks in the country were yet to learn from the experience going by their ways of operations.

“One of the greatest shocks from the financial crisis has been the widespread failure of risk management. In many cases, risk was not managed on an enterprise wide basis and was not aligned with the corporate strategy.

“Weak corporate governance had been identified as one of the major causes of financial system distress in the Nigerian Banking Sector. The large scale failure of banks in the late 90’s was occasioned by poor corporate governance characterised by: Board room squabbles, insider abuses, conflict of interest, overbearing influence of significant owners (that was the era of Chairman/CEO), inadequate diversity of the board, lack of professionalism and independence. Those malaises were also identified in all the five banks whose managements were changed by the regulatory authorities in 2009. Corporate abuse, unfortunately, has persisted in spite of efforts by the regulatory authorities to encourage good corporate conducts through enhanced code of corporate governance, administrative directives and guidance and indeed moral suasions”, he said.

Read also: NDIC advocates sanctions against banks

Acknowledging central bank’s effort at saving the banking sector from future financial impediments, the President of the association, Gregory Jobome, lauded the shift from basel 1 to basel 11 accord, the implementation which still retain a minimum capital retention of eight percent of risk weighted asset.

He maintained that this has not just succeeded in standardizing capital adequacy requirement among nations, but has also been able to enhance corporate governance and risk management system in the country.

While also commenting on CBN directives to Commercial banks to publish names of debtors, Jobome urged the concerned not to see the move as an attempt aimed at humiliating them, but that they should see it as an effort that is geared at sanitizing the financial environment.

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