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What happens if any of the five affected banks fails to recapitalize within the shortest possible time?
  The CBN has assured that no bank will be allowed to fail. Indeed, the Federal Government of Nigeria has also reiterated this fact. However, should any of the affected banks fail to recapitalize within the shortest possible time, the CBN may consider a merger or acquisition option in resolving the problem.
 

Why does the CBN have to undertake the audit of deposit money banks?
  One of the core mandates of the CBN as contained in section 2 of the CBN Act 2007 is to promote a sound financial system in Nigeria. This function is carried out through the supervision and regulation of financial institutions including Deposit Money Banks (DMBs). In carrying out this function, the CBN relies on the provisions of sections 30-32 of the Banks and Other Financial Institutions Act (BOFIA) which empowers it to carry out routine examination of banks, other financial Institutions and specialized banks. The audit of DMBs is therefore in consonance with the responsibilities of the CBN under its enabling Laws. As a result of the global financial crisis which adversely affected the Nigerian economy, in particular the capital market and oil and gas sectors, it was observed by the regulators that some Nigerian banks had huge concentration of exposure to these two sectors, in addition to general weaknesses in risk management practices, poor corporate governance practices and signs of illiquidity as confirmed by the regular visits of the affected banks at our Expanded Discount Window (EDW) and the Standing Lending Facility (SLF) window from October 2008. It therefore became compelling to ascertain the true financial health of the Nigerian banks in the public interest.
 

Will the full result of the audit be made public?
  The CBN carries out its supervisory duties in respect of banks, Other Financial Institutions (OFIs) and specialized banks under conditions of confidentiality as contained in section 30 of the BOFI Act. In this regard, details of the audit as it affects individual institutions cannot be made public. Individual banks are however expected to make appropriate disclosure including full disclosure of loan provision in financial statements in line with international standards not later than September 2009. However, the broad findings as they affect the financial system have been made public and are well documented in the press.
 

How will the measure affect depositors and investors in the financial market?
  The full disclosure measures as directed by the CBN are primarily meant to further entrench sound corporate governance in the financial system where accountability,transparency and prudence are the grand norm. Hence the intention of the CBN is to provide users, including investors and depositors, with requisite information to enable them evaluate the financial position, performance and operations of banks with a view to taking well informed decisions as to where to put their CBN’s ultimate aim is to have in place a full disclosure regime that will put the nation’s banking industry at par with best practice and international standard. The measure is in tandem with best practice and in pursuant for the attainment of the world acclaimed requirements of BASEL 11and International Financial Reporting Standards (IFRS).
 

What are the benefits of the measures to the financial institutions and the market in general?
  The provision of adequate information enhances the integrity of banks and reduces the reputational risks that could lead to loss of confidence and patronage. It will also help to reduce market uncertainty and limit the risk of unwarranted contagion. The effort of the Bank at enhancing the current regime of information disclosure by banks will help to further promote market discipline. When these are achieved, the banks would have been strengthened to play their intermediation role in the economy. The market would also have been better placed to effectively act as a transmission mechanism for monetary policy measures.
 

What are the implications of implementing the requirements to the banks?
  Obviously the banks will be better off with full compliance and implementation of the additional disclosures as directed by the CBN since the merits of full disclosures far outweigh the demerits. The banking sector, like every other segments of the financial system thrives on trust and confidence. The full disclosure option will assist all stakeholders to evaluate the true and fair positions of the banks and confidently take informed decisions about them. Consequently, the confidence of stakeholders will be a major selling point for the banks. The issue of demarketing among the banks would have been systematically and permanently addressed.
 

What are the objectives of introducing the full disclosure requirements?
  The objectives of introducing the full disclosure requirements are essentially to provide economic agents (depositors and investors) and other stakeholders with appropriate information to assist them in evaluating the financial positions and performances of banks and to enable them obtain better understanding of unique characteristics of the operations of banks. In view of this, an over-arching and implicit objective of banking regulation and supervision is to ensure the emergence of a strong, safe, stable and reliable banking system that will engender and sustain the confidence of depositors and other stakeholders.
 

What do full disclosure requirements mean?
  Full disclosure requirements are the mandatory financial, operational and management information, which financial institutions are required to disclose in the rendition of their periodic returns to the regulatory authorities and the public. The process has to do with ensuring the integrity of data in the rendition of reports to the supervisory authority and the public in order to enable them ascertain the true financial position and performance of deposit money banks.
 

1. Question: Can a customer of bank write to the department and complain on an injustice done to him by the bank?
  Yes, a customer is free to write to us and complain. If proven, the appropriate action would be taken.
 

A customer was denied a facility in a bank because he was reported by the CBN credit bureau as having bad credits with other banks. Is the CBN controlling the disbursement of credits by banks?
  No. the CBN credit bureau is only a database where information on all borrowers in the financial system is collated and disseminated to banks to assist them in appraising the repayment capabilities of customers seeking new or additional credit facilities.
 

As a result of the new capital requirement, are foreign banks also being forced to increase their capital bases?
  In order to operate as deposit taking institutions in the Nigerian Financial system, foreign-owned banks have to be incorporated in Nigeria as local companies and thus are subject to the rules and regulations guiding all such institutions in the country.
 

Beyond N25 billion does CBN plan any further increases in the capital requirements for banks?
  The Law empowers the CBN to set minimum capital requirements for the banking system from time to time.
 

How can I get a copy of the Banking Supervision Annual report?
  You can download a copy of the report from the CBN website: www.cenbank.org
 

How did the banks that were granted forbearance by the CBN run up the debts?
  The debts were incurred in the course of CBN playing its role as lender of last resort and as a result of the clearing system that used to be in place. This has since been changed and a new clearing system is in place therefore such indebtedness is no longer possible under the new clearing system. In the old clearing system a bank's balance may fluctuate temporarily between credit and debit, however over time the debits of some banks became core, those debits represent the forbearance by the CBN.
 

How does the CBN intend to speed up the Court Processes? What relevance will the Investment and Securities Tribunal have in the Consolidation process?
  The Consultative Committee on Banking Sector Consolidation is a high level committee which has as its members, the Hon. Minister of Justice as well as the CBN amongst others. This issue is being handled at that level.
 

Since the CBN does not allow the use of borrowed funds to buy shares, should banks be allowed to underwrite bank offers?
  The process of underwriting the offer of a bank shares are overseen by Securities and Exchange Commission as well as the CBN. There are regulations in place to guide banks in underwriting shares.
 

What are CBN requirements/conditions for mergers?
  The requirements/conditions of CBN for mergers are as stated in the Guidelines & Incentives on Banking Sector Consolidation issued on 5 th August, 2004 and the "Revised Procedures Manual for Processing Applications for Bank Mergers/ Takeovers "
 

Why does the CBN not inform customers about the condition of a bank before the revocation of its licence?
  Section 27 of the Banks and other Financial Institutions Act No.25 0f 1991 has mandated banks to publish its Annual Accounts with the approval of the CBN four months after the end of its financial year. These Accounts contain details of the financial position of the bank. Customers are therefore advised to take particular interest in the audited and published Annual Accounts of banks for information.
 

Will the CBN and NDIC create an Asset Management Company (AMC). If so what will be the proposed share capital of the AMC and when will it be ready to start business?
  An AMC is part of the CBN 13 point Agenda. The CBN / NDIC (Nigerian Deposit Insurance Coporation) framework for the proposed AMC is presently being finalized and the details will be made public at the appropriate time.
 

What is the approval process for mergers of CBN?
  The approval process of the CBN is available as a formal checklist sent to all banks and is on the CBN website.
 

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Facts : 1/1/1995
National Clearing System Re-Visited:In January 1995, a revised clearing rule became operational to facilitate effective clearing of financial instruments and shorten the period of clearing. Consequently, inter-state cheque clearing time was reduced from 21 days to 15 days, while intra-state clearing has been reduced from 12 days to 9 days.
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