Creating a Healthy Financial System through Regulation

ByDr. Kingsley C. Moghalu

Deputy Governor, Financial System Stability

Central Bank of Nigeria

Creating a Healthy Financial System through Regulation

A brief perspective on global financial issues

What triggered the latest global financial crisis

The unprecedented contagion effect

Cost of the crisis - IMF projection within G20:

$11.9 trillion (£7.1 trillion) Approx 1/5th of entire global annual

economic output

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Creating a Healthy Financial System through Regulation

Cost of the crisis – in context:

Source: globalissues.com - BBC, Bloomberg, UPI3

Creating a Healthy Financial System through Regulation

What happened in Nigeria ?

Factors that tipped us into crisis: Macro-economic instability caused by unstable

oil prices and large and sudden capital inflows Excessive exposures of banks to the capital

market Major failures in corporate governance at banks Lack of investor and consumer sophistication Inadequate disclosure and transparency about

financial position of banks4

Creating a Healthy Financial System through Regulation

What happened in Nigeria ?

Factors that tipped us into crisis (cont’d): Critical gaps in regulatory framework and

regulations Ineffective supervision and enforcement by the

CBN Weaknesses in the business environment

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Creating a Healthy Financial System through Regulation

Broad Outline of Ongoing Reforms - #1

Enhancing the quality of banks

Remedial programs

Risk-based supervision

Regulations and regulatory framework reforms

Consumer Protection

CBN Internal reforms

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Creating a Healthy Financial System through Regulation

Broad Outline of Ongoing Reforms - #2

Establishing financial stability

Asset Management Corporation of Nigeria (AMCON)

Bank mergers and acquisitions

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Creating a Healthy Financial System through Regulation

Broad Outline of Ongoing Reforms - #3

Enabling healthy financial sector evolution Review of Universal Banking

Active support for development and deployment

of scalable infrastructure

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Creating a Healthy Financial System through Regulation

Broad Outline of Ongoing Reforms - #4

Ensuring the financial sector contributes to the real economy

Leveraging the CBN Governor’s role as adviser to President on economic matters

Measuring the relationship between the real economy and financial sector and the transmission mechanism

Evaluating the effectiveness of development finance

SME development 9

Creating a Healthy Financial System through Regulation

Conclusion

Nigeria is a developing country with a financial system that requires strict and smart regulations that drive institutionalization of appropriate risk management models, corporate governance, qualitative disclosures, consumer and investor protection and ensures adequate support for the real sector that will grow the economy.

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Thank you

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