CBN, NDIC and supervision of banks – The Sun

At the recent public hearing on a bill to amend the Nigeria Deposit Insurance Corporation (NDIC) Act 2006 organised by the House of Representatives Committee on Banking and Currency, a disagreement broke out between representatives of both the Central Bank of Nigeria (CBN) and NDIC on which of the two regulatory institutions has the constitutional right to supervise commercial banks in the country.
As required by law, a bill for an Act to repeal the existing NDIC Act (2006) and re-enact a new one, and other matters connected therewith, must be supported by  the apex regulatory body, the CBN, especially with regard to supervision of banks. Articulating the position of the CBN on the proposed amendment of the NDIC Act, Director of Banking Supervision, Mrs. Tokunbo Martins said that the CBN strongly disagrees with the inclusion of banking supervision as a mandate of NDIC.
She argued that while the CBN agrees with most of the proposed amendments to the NDIC Act, the organisation should be limited to its core responsibility of ensuring the safety of depositors’ funds in commercial banks and payment of customers’ deposits in the event of  liquidation of failed banks. According to her, limiting NDIC to these core mandates has become necessary because “there cannot be two captains in one ship”.
The Managing Director/CEO of NDIC, Alhaji Ibrahim, however, sharply disagreed with her. He averred that banking supervision has been one of the mandates of NDIC, claiming that the current CBN Governor, Mr. Godwin Emefiele, was well briefed on the proposed amendments, and has consented to them. The CBN representative, nevertheless, insisted that Emefiele could not have agreed that banking supervision should be part of the duties of NDIC.
The disagreement of the representatives of the CBN and the NDIC on this matter is not unusual. This is not the first time that  regulatory agencies will have public disagreements on the scopes of their responsibilities. But, this one on the supervision of banks is inexpedient to the entrenchment of confidence in the banking sector. The issue of the regulatory agency that has the responsibility to monitor and supervise banks should not be a subject of debate. Besides, this debate should not be, if the rules and regulations  guiding the matter are clear.
This bickering and rivalry between these regulatory authorities are needless, distractive and unhealthy for our banking system and the economy. What we need at this time is cooperation and closer supervision and monitoring of the sector.
It must be noted that the government has a duty to ensure a responsible and responsive bank regulatory system. The supervision of banking activities features in  the laws setting up both CBN and NDIC. However, that should not lead to the present splitting of hairs by the two agencies. For instance, the Act establishing NDIC is unequivocal that the body has the responsibility of ensuring that all deposits and liabilities of licensed banks and other financial institutions operating in Nigeria are insured, providing assistance in the interest of depositors in the event of “imminent or actual financial difficulties”; “guaranteeing payments to depositors and assisting the authorities in the formulation and implementation of banking policy”.
In a similar vein, the apex bank has its roles clearly spelt out in our laws. Apart from its central role of monetary policy, the CBN has a dual mandate to steer the economy toward stable prices and job creation through monetary policy implementation.
But more specifically, the Banks and Other Financial Institutions Act  (BOFIA) confers on CBN the power to regulate banks and other financial institutions on matters connected therewith, which include, but are not limited to licensing, examination (on-site and off-site), supervision, takeover and control of management of distressed banks, prescription of capital requirement, revocation of licences and general control over banks and other financial institutions operating in Nigeria.
With this apparent overlapping  responsibility for bank supervision by both institutions, it has become necessary to have a clear delineation of the roles of  these two important institutions to avoid this needless controversy.
Rather than bicker over supremacy of roles, the overall interest of the banking system should be above all other considerations. This is because banks thrive on the confidence of the banking public.
Let the proposed amendment of the NDIC Act be clear and unequivocal, to resolve the  conflicting views on the supervision of banks in  the country.