Bank crisis: Senate may propose splitting CBN’s functions

The radical transformation of the Central Bank of Nigeria is a possibility soon as plans have reached an advanced stage in the Senate to split the functions of the apex bank by ceding some of it to a new regulatory agency.

It was gathered that the move followed a discovery in its weakness in discharging its supervisory role, which resulted in the current crisis in eight banks whose chief executive officers were sacked between August and October.

A source in the Senate told our correspondent on Wednesday that a proposal was being considered to restrict the apex bank and the National Deposit Insurance Corporation to concentrate on “their core functions.”

In doing so, the CBN, it was learnt, will by law be restricted to monetary policy formulation and keeping inflation in check and maintaining stability of interest and exchange rates.

A body that will be created from the CBN split, the source said, would be placed in charge of operational issues and banking supervision.

The body, which is to be patterned after similar agencies in the United Kingdom and South Africa, will “watch over” commercial, microfinance and mortgage banks.

This is with a view to generating data to enable regulators deal with threats or potential threats to the economic stability of the country.

This will form part of the major amendments being proposed to the CBN Act (2007), which President Olusegun Obasanjo signed in the twilight of his administration.

The Chairman of the Senate Committee on Banking, Insurance and Other Financial Institutions, Senator Nkechi Nwaogu, confirmed the proposal in an exclusive interview with our correspondent in Abuja on Wednesday.

Nwaogu said, “Amending the Central Bank Act (2007) is the major thing we are going to embark on because we in the Senate believe that the CBN Act of 2007 requires a lot of modifications.

“We are of the opinion that the CBN needs to be split into two. We need a different agency to be responsible for the supervision of banking operations, while the CBN should be saddled with the core functions of monetary policy and regulation.”

To make things work better, the NDIC Act is also to be strengthened to ensure that it not only performs its role as insurer of depositors’ funds but also provides and analyse financial reports on the state of banks.

Nwaogu said, “The NDIC Act is an Insurance Deposit Act. It is for Deposit Insurance Companies.

“What primarily should be their core function is that it is not just majorly an undertaker when the banks fail.

“They should be able to provide reports and analyse bank financial status every now and then.

“The new body will be similar to what is being done in the United States and Britain, where they have Financial Services Authority.

“They will be responsible for supervising the commercial banks, the microfinance banks and mortgage banks while the deposit insurance company- the NDIC, should be working with them just like they are working right now.”

Nwaogu added that the Senate was also pursuing the case of depositors whose funds were trapped in failed banks.

She explained that the change of guard at the CBN, as well as other related issues, slowed down action in that direction.