Senate panel advises CBN on banks’ recapitalization

The Chairman of the Senate Committee on Banking, Insurance and Other Financial Institutions, Tokunbo Abiru, has called on the Central Bank of Nigeria to ensure banks put the liquidity that would result from the recapitalisation exercise to productive sectors of the economy.

Abiru said this in his goodwill message at the swearing-in of the 23rd President/Chairman of the Council of the Chartered Institute of Bankers, Professor Pius Olanrewaju, on Friday in Lagos.

The senator recalled that in the aftermath of the 2005 capitalisation exercise, some banks had made poor investment choices, which necessitated another round of capitalisation years later.

“Much as I welcome the CBN’s recapitalisation programme, the lessons of the aftermath of the 2005 recapitalisation, which revealed the downsides of unchecked liquidity, must be borne in mind.

“It will be recalled that many banks at the time, awash with capital, resorted to investments that destroyed value, necessitating subsequent reforms that led to another round of recapitalisation, five years later, in 2010.

“To prevent a recurrence, the CBN must exercise vigilant supervision to ensure that post-recapitalisation liquidity is judiciously deployed in productive assets that stimulate economic growth,” he said.

Abiru also called on the apex bank to engage with other regulators and players in the banking sector on the exclusion of retained earnings from the recognised capital base of the banks.

Recall that the Institute of Chartered Accountants of Nigeria has also called on the apex banks to reconsider the exclusion of retained earnings.

He also maintained that the rationale for an upward review of the capital base of banks cannot be overemphasised.

The Senate committee chairman also called for an upward review of the regulators’ capital requirements.

He said it had “become necessary at this time and I am pleased to note that it is part of the proposed amendments to the CBN and NDIC Acts, currently being considered by the National Assembly.”

Both the CBN Act and the NDIC Act have passed the second reading in the Senate.

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