Worried by the resurgence of huge toxic loans in the banking sector, the Managing Director/Chief Executive Officer, Asset Management Corporation of Nigeria (AMCON), Mr. Ahmed Lawan Kuru, yesterday, in Lagos, called on the financial regulators to revisit the Failed Bank Act, to make bankers accountable for their actions.
He equally urged banks to immediately strengthen their risk management framework to stem the negative growth.
Kuru spoke when he hosted officials of Risk Management Association of Nigeria (RIMAN), led by its President, Mr. Magnus Nnoka, the Chief Risk Officer,
Coronation Merchant Bank, on a business visit to AMCON Lagos office.
He said the reintroduction of the Failed Bank Act into the country’s financial system will not only curtail the current trend of financial rascality by some bankers, but also bring discipline to the banking industry in general.
He noted that “Immediately after the intervention of the Central Bank of Nigeria (CBN) in 2009, they insisted that risk management must be given prominence right from the Board level to the account officer. What we have noticed now is the lack of consequent framework to manage the risk structure.
We have noticed prevalence of key men risk. Credits are booked with impunity without any intentions of being paid. The grievous impunity is taking place along the credit process. There is the urgent need to revisit the failed bank act so that operatives become responsible for their actions. We believe it will bring discipline to the banking industry.”
Privileged to have been on both sides of the divide – as a banker, and now a regulator, Kuru noted that given the huge resources available to financial institutions, and the pivotal role they play in economic development, make it mandatory for them to take risk management issues seriously, to prevent a reoccurrence of the global financial crisis.
He suggested that in line with the fight against corruption, there is also a need to fight against impaired and arranged credits, so that operators are held responsible for booking credits that go bad under their supervision contrary to their credit policy.
He recalled that one of the reasons for the failure of the banking system during the 2008/2009 global financial crisis, which eventually birthed AMCON, was the prevalence of weak risk management framework by financial institutions.
Kuru said the trend became a baggage, which contained all sorts of bad omen for the economy, including poor corporate governance structure, lack of robust risk management strategy, and lack of adherence to laid down principles that govern credit approvals by financial institutions.
Kuru, who said the damage financial institutions do to the economy when they book fictitious loans was worse than corruption, added, “AMCON is currently sitting on huge stock of non-performing loans, with banks looking for liquidity to book more loans. As practitioners, you need to join the campaign to bring sanity in own credit process. You can clearly see that the system is skewed towards accommodating large credits, which pose serious survival challenges to the financial institutions on failure, whilst the small credits/SME always require regulatory intervention to be accommodated. Given what I have seen in AMCON, we must bring both the obligors and the operators to account for the bad credits.”