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CBN pushes agenda for cross border supervision of banks

Source: Daniel Nonor (Email [email protected]) - Ghanaian Chronicle

The Central Bank of Nigeria (CBN) is seeking greater regional integration and modalities that could lead to cross boarder supervision of banks in the region. The Governor of the Central Bank of Nigeria, Lamido Sanusi was in Ghana to officially brief this Ghanaian counterpart, Dr. Amissah Arthur, Governor of the Bank of Ghana on measures it took recently to restructure the banking sector in Nigeria.

“Those measures are history now. We are now moving to other measures and it is important to start the process for ongoing collaboration and exchange of information between our banking supervision and research departments,” Sanusi said when he met a cross section of the media in Accra.

His visit was to set the foundation for greater integration between the two countries on the way forward, towards a cross border supervision of banks in the region. Key among issues that the two hope to achieve through the collaboration include the establishment of cross border supervision of banks, the West African clearing house and common currency, prospects of improving trade and the prospects for West African Central bank .

These issues, according to Sanusi, needed to be worked on to achieve short, medium and long term goals. Asked if he would advice that Ghana also audits its banks, he said “It's not my place to advice a regulator on what to do, but one thing I know is if you look at what happened to Lehman brothers, one clear lesson is that a regulator can be taken by surprise.”

He cautioned that a bank could appear to be strong and solid, but in fact, would be sitting on problems. This, he said informed his action to audit the bank to know what their conditions were to see if there were any problems so that action is taken to pre-empt any crisis. “I think it would be a wise thing for any regulator to satisfy itself that it has sufficient knowledge of the workings of institutions that they supervise to be comfortable that there is no risk,” he added.

Governor of the Central Bank of Nigeria, Lamido Sanusi, who only took office in June, carried an audit of all banks in Nigeria in the bid to clean up the system. In August, he injected a total of NGN 400 billion into five banks in the first batch of banks audited –Afribank, Intercontinental Bank, Finbank, Oceanic Bank and Union Bank - after they were found to have very low cash reserves and therefore fired their managers.

The banks had run up bad loans totalling a collective NGN1.14 trillion. Four of the Chief Executives have now appeared in court, charged with fraud. After completion of audit of the final batch of 14 banks, Nigeria's central bailed out four more banks and sacked three of their chief executives.

The rescued banks - Equitorial Trust, Bank PHB, Spring Bank and Wema Bank – were given 200bn naira ($1.37bn; £861m) in loans and support. After an audit of their books, the central bank said they were “grave situation”.