Full interview by the new CBN Governor in the link below. He also said he does not have problems with Foreign banks or investors owning a majority in Nigerian Banks


http://www.ft.com/cms/s/0/9b5955c4-5e5d-11de-91ad-00144feabdc0.html


FT: Are you saying that you are planning to launch an audit exercise under the aegis of the central bank to diagnose the scale of the margin loan problem?

Lamido Sanusi: And the NDIC, yes I am.

FT: How long would that take do you think?

Lamido Sanusi: If we start immediately you could cover the 24 banks in six to eight weeks max.

FT: When are you planning to launch the exercise?

Lamido Sanusi: I have launched it.

FT: So in six to eight weeks you feel you’ll be in a much more confident position to really understand the scale of the margin loan problem?

Lamido Sanusi: Yes I think so. I will. In the interim we’ll be looking at the various options of how to handle them.

FT: But it sounds like you are not planning to make those figures public immediately upon completing the exercise?

Lamido Sanusi: I may actually. It depends on what communication strategy is adopted. I certainly would expect that long before December we begin to apply prudential accounting standards and we will continue to increase the disclosure requirements for banks. Even before IFRS we will decide what we think banks should disclose from June and from September when they publish their accounts and what information they should make public.

FT: It sounds like you are planning to impose more stringent disclosure regulations quite soon?

Lamido Sanusi: Yes, we should be able to have full-blown disclosures by the time the financials end in December.

FT: When you say “full-blown” what do you mean?

Lamido Sanusi: We might, even before the December accounts, require certain things to be disclosed. How much is disclosed between now and December depends on how much risk we perceive to be to the system with too much information in public hands.

FT: Could you give me a sense now of what types of figures you’ll be requiring the banks to reveal at minimum?

Lamido Sanusi: I think at the very least, since margin loans are a problem, people should know exactly what percentage of the loan book is exposed to margin loans, they should know exactly what kind of proprietary positions the banks are holding and they should know what the value is and they should know which loans are performing and which loans are non-performing, those should form part of disclosure requirements.

FT: What would be the key way in which the new requirements will differ from the existing set up?

Lamido Sanusi: Remember the disclosure requirements are requirements principally of listing on the stock exchange, The stock exchange simply requires some key figures, so what’s published quarterly tends to be gross income, profit-before-tax, profit-after-tax, sometimes one or two more lines. The asset quality details are not there, and frankly this is true of all accounting numbers…The risk complexion differs depending on concentrations, on industries, on collateral….Ideally we should get the stock exchange to agree on the disclosure requirements for listing, not just for banks but for all public companies so we improve information and transparency.

FT: Are you talking about imposing mandatory IFRS on banks?

Lamido Sanusi: IFRS helps, as you know in First Bank we did convince the board to adopt IFRS. But it’s extremely important to understand that if the problem is the integrity of data being presented, then IFRS does not address that problem. If it is true -- and I’m not saying it’s true -- but if it is true that an institution presents significantly distorted figures….there is nothing that stops them presenting false numbers under IFRS.

FT: And that’s going to be a problem you may confront throughout this whole exercise. How will you ensure that you can actually believe the numbers that banks are presenting you with?

Lamido Sanusi: That is what this whole exercise is about: send our own people to check. I think we do have ways of testing those numbers. I’ve already told you that if you have an idea of the global picture then you would expect certain results that you would see. Statistically things can point you to areas that look suspicious. So for example, if the bulk of banks have margin loans and on average you find that 40-50 per cent are non-performing and a particular bank has only 5 per cent that is non-performing, that is enough reasons to say ‘go and look at those numbers closely.’ There is always a way of getting an idea of where the wrong numbers are.

I think it’s also important to send very clear signals to bank executives that it’s not a crime to make a loss, but it’s criminal to lie about it, and people need to understand that. It’s actually better to disclose truthfully that we had a bad year, or we made a mistake, than to deny that there’s a problem. It goes into governance issues, into sanction issues, into fit and proper issues.

FT: When you conduct this audit then, you will be looking out for evidence of banks that may have not been declaring truthful numbers. Will you be seeking to sanction any banks that you find have been manipulating their books?

Lamido Sanusi: You wouldn’t sanction a bank. You would as much as possible see what you can do about deciding whether certain individuals belong in this profession. The banks are so much bigger than individuals. It’s important, I think, for the investor to know that there are many stakeholders in financial institutions. The bank managing director is one person. These banks have millions of depositors, they’ve got millions of shareholders, they’ve got thousands of employees and they play a major role in the economy. In the event of finding out that a management team has been errant, it’s extremely important that in dealing with that problem we do not place the investors, the depositors, the employees and the economy at risk. It’s about that balance, but certainly we’re not going to ignore it.

FT: If this audit reveals that some bank executives have been cooking the books, if you like, you will take action to remove them from their posts?

Lamido Sanusi: Not just this audit -- if at any point in time I have reason to believe that a bank chief executive is not fit to be chief executive I will remove him.

FT: What’s your gut feeling? Do you think that in the next few months we’ll see a few bank chief executives leaving their jobs?

Lamido Sanusi: I would rather not say anything about that. I would rather wait for the results.

FT: Your predecessor was sometimes accused by his critics of having a rather cosy relationship with some senior bankers, and some people in the market believe he was compromised as a result. (Ed: Mr Soludo denies this). It sounds like, from the language you’re using, you are keen to take a much tougher line.

Lamido Sanusi: I have avoided making any comments about my predecessor that are adverse. I would rather continue like that. But I do believe that the dividing line between the regulator and the operator needs to be very clear and I need to be very clear about my role as a regulator, and that includes creating a level playing field. It also includes very clearly avoiding questions of conflict of interest. I will give you an example. I have just left First Bank, and as an employee of First Bank I had loans that were staff loans at concessionary rates. Usually, what happens in institutions like that is when you have left they leave your loans at that concessionary rate. One of the first things I did was to call the MD and say I wanted my loans converted to a commercial rate, precisely because I am the governor of central bank. I did not take advantage of the opportunity to just leave the loans at that rate because I’ve got to set for myself standards if I intend to hold other regulators to those standards. I think we need to make that distinction clear and we also need to understand that there are certain circumstances that could lead to conflict of interest, and we need to be very explicit in our definition of those circumstances. You may not avoid everything, you may not stop people from borrowing from banks, you may not stop people buying shares in banks, but then if they do, to what extent? What are the terms? What are the disclosure requirements? We’ve got to look at all of those and generally improve governance.

I would personally say senior regulators shouldn’t be shareholders in the institutions that they regulate. I personally would sell any shares I own in any banks.

We also need to sit with other regulatory bodies and agree on a code of conduct for regulators. The problem is not just the central bank. A lot of this problem has also come because of governance issues in the stock exchange, the Securities and Exchange Commission, rules around insider-trading, rules around margin lending, the conduct of stock brokers. There has been a general problem in this country where we de-regulate and liberalise and privatise and then we don’t put in place the appropriate regulatory mechanism. The institutions are there, but in terms of what it means to be a regulator, there has been a constant problem. And markets when they are left unregulated can come with problems.

FT: But it sounds like your vision for the sector then is perhaps, again, a different one from your predecessor who came out a few times and did make statements about limits on foreign ownership. You are sounding like you would prefer to open the field very much to foreign players?

Lamido Sanusi: I think my vision has always been different from my predecessor’s. We’re two different people. On this particular matter, my view has always been different.

Look at this way, if you look at the register of many banks, you’ve got shares that are owned by nominees. Now I don’t know who these nominees are. And I believe under the laws in which they are set up, the nominees are not obliged to disclose the persons behind them. So if as governor of central bank I am okay to have a bank owned by nominees and I don’t know who owns them, why wouldn’t I be comfortable with a bank owned by a Barclays, or HSBC or China Construction Bank, who I know? For me it’s a no-brainer.

At the end of the day, the bank takes on the character of its owners. The greater transparency I have in the ownership of a bank, the better run that bank will be.

He can talk, but lets wait and see him walk.

biina:

He can talk, but lets wait and see him walk.

i couldnt agree more

Good speech,proudly Nigerian style.

Siddon look, time will tell

Oh my!!! I really do hope this happens! It is about time we get a true picture of the reality of banking in Nigeria is.

from this interview, he does not come across as a dumb guy. time will tell though.

Tough speech, so eloquent. I hope he will not be a puppet.

noetic2:

from this interview, he does not come across as a dumb guy. time will tell though.

He couldn't have been dumb and rise to become the MD of first bank? There is still a good level of professionalism int he private sector

not just for banks but for all public companies so we improve information and transparency.

good good

Folks the economy reacts to Market behaviour

If he needs to scrutinize banks, its better for all our sake that he stringently carries out the process behind the scenes and implement corrective measures where necessary.

Their is no benefit whats soever having your CBN Governor making comments that raises suspicion in the Nigerian Banking system because that is capable of creating panic, investors taking their money away at an exponential rate and the Banks and by extension the economy will suffer more than would have been the case.

He is no longer running for CBN Governor, he is now the CBN Governor.

Sanusi must understand the implication of his statements

^^^

suspicion in the banking sector?
whats happening in the banks is known to everyone already, acknowledging mistakes and taking action is what we need

mikeansy:

Folks the economy reacts to Market behaviour

If he needs to scrutinize banks, its better for all our sake that he stringently carries out the process behind the scenes and implement corrective measures where necessary.

Their is no benefit whats soever having your CBN Governor making comments that raises suspicion in the Nigerian Banking system because that is capable of creating panic, investors taking their money away at an exponential rate and the Banks and by extension the economy will suffer more than would have been the case.

He is no longer running for CBN Governor, he is now the CBN Governor.

Sanusi must understand the implication of his statements

Wow, when we read the story in newspaper this morning, the first thing my boss said was: ''. . .so we now have to look properly and select the bank to put our money. . . '' meaning he was already thinking about withdrawing his money from or at least not putting future money in perceived-to-be-unhealthy banks.

But I think Soludo, your boy, was also guilty of this - public pronouncement of policy statements even before conclusion on whether it will be implemented.

And I personally don't see anything wrong in it.

Jarus:

Wow, when we read the story in newspaper this morning, the first thing my boss said was: ''. . .so we now have to look properly and select the bank to put our money. . . '' meaning he was already thinking about withdrawing his money from or at least not putting future money in perceived-to-be-unhealthy banks.

But I think Soludo, your boy, was also guilty of this - public pronouncement of policy statements even before conclusion on whether it will be implemented.

And I personally don't see anything wrong in it.

Jarus

this is not about Soludo vs Sanusi (Soludo is history as far as CBN is concerned)

This is not also about public pronouncement of policy, there is nothing wrong about public pronouncement of policy
There will be nothing wrong if Sanusi comes out to tell us that he is planning to push for more Government spending so as to tripple the amount of money available to MicroFinance Banks. There is nothing wrong with that as it instills confidence in the economy.

But when a CBN Governor goes on National Newspaper to suggest that some Banks may be at risk even before auditing, that creates panic and that is irresponsible because it is capable of triggering flight of investment from the country.
He should audit these Banks, help those who might have issues take corrective measures quietly.

mikeansy:

But when a CBN Governor goes on National Newspaper to suggest that some Banks may be at risk even before auditing, that creates panic and that is irresponsible.

I think a valid point was made above.
Audit should be geared towards correcting system lapses.
Audit recommendations are made first and foremost before they
are discussed and implemented.

A govnor dat is talking about punitive measures of a yet to be conducted audit exercise
and a yet to be released audit recommendations aint giving a positive signal.

@Mikeansy,

mikeansy:

But when a CBN Governor goes on National Newspaper to suggest that some Banks may be at risk even before auditing, that creates panic and that is irresponsible because it is capable of triggering flight of investment from the country.
He should audit these Banks, help those who might have issues take corrective measures quietly.

Your point is very valid.

mikeansy:

Folks the economy reacts to Market behaviour

If he needs to scrutinize banks, its better for all our sake that he stringently carries out the process behind the scenes and implement corrective measures where necessary.

Their is no benefit whats soever having your CBN Governor making comments that raises suspicion in the Nigerian Banking system because that is capable of creating panic, investors taking their money away at an exponential rate and the Banks and by extension the economy will suffer more than would have been the case.

He is no longer running for CBN Governor, he is now the CBN Governor.

Sanusi must understand the implication of his statements

Much as it seems you have a valid point as to information management, there's no way corrective measures can be carried out in the banks without coming to the public domain, especially given the rot in the system.

I was in the banking sector - so I know the level of malpractices going on there. No doubt, some chief executives will have to go, if a thorough audit is done. Do you think the public will not get to know if some executives are asked to go? Oh you think people could not read between the lines when it happened to Spring bank? 

What Sanusi is obviously preaching now is in order. Banks should be as transparent as possible. The act of deceiving depositors and investors with cooked up figures is gravely criminal. This has to stop!

If a bank must exist, then the bank must adhere to standard business practices, otherwise it should be swallowed up by another bank!

Nice piece of rap.
I will like to see him act, all Nigros could talk.
Besides, how come no one ask him anything about the forex?

Fhemmmy:

Nice piece of rap.
I will like to see him act, all Nigros could talk.
Besides, how come no one ask him anything about the forex?

I think it was addressed in the full version.

Hmmmm! I have my fears!
Mikeansy has made a very valid point.

The CBN Governor has a duty to protect the banking system.
Being tough is OK, but talking tough on the pages of the media is not a good sign at all.
They haven't done the audit and he is speaking like he already knows the results. I fear the outcome.
I already feel like pulling my funds out of the system.

The banking system currently is filled with cooked up figures- True! But I bet you, cooked up figures are much better than having a system where there is low public confidence.

Sincerely,there's got to be some crude agenda.
I'm not a fan of ethnic profiling and I don't usually like commenting on ethnic issues, but I must say this one:
The North lost out drastically in the Banking sector and it wants badly to get back in. Of the 24 banks in the country, only one is owned by, or headed by a northerner. And that one is Unity bank- the smallest and least successful bank in the country.

When he opens up the banks to foreign ownership, Arab money moves in to take over majority of the banks!
It sounds very stupid, but I had to add that, cos I know its a fact and that's the agenda!

@papabrowne
I disagree with your position of cooked up figures vs low public confidence. Low public confidence would only be temporary as accurate books would lead to improved public confidence. Cooked up figures on the other hand is a recipe for disaster as it would come to hurt the depositors sooner or later, and would result in low public confidence.

While I agree with mikeansy that the CBN needs to be careful in making statements that could panic depositors, one does not need the audit to know that the sector has cooked up books (even you just made the same claim). Like he sanusi described, if the total loss in the sector is NGN1 billion, you would expect the sum of the losses of the banks to equate to it, else someone is cooking their books. He didnt point to a specific bank(s) as that is the real purpose of the audit.

As to the crude agenda on foreign investment, I partially agree with him, in that the current laws are inconsistent, but I would rather they move to disclosure on the shareholder side, than to throw open the entire capital sources. I think the resident banks of the oil companies like HSBC are more eager to move into the sector than any arab is to invest in a Nigerian bank.

Folks the economy reacts to Market behaviour If he needs to scrutinize banks, its better for all our sake that he stringently carries out the process behind the scenes and implement corrective measures where necessary.Their is no benefit whats soever having your CBN Governor making comments that raises suspicion in the Nigerian Banking system because that is capable of creating panic, investors taking their money away at an exponential rate and the Banks and by extension the economy will suffer more than would have been the case.
He is no longer running for CBN Governor, he is now the CBN Governor. Sanusi must understand the implication of his statements[quote][/quote]


True statement ,but it is also important to tell Nigerians and the whole world that the CBN this time around is commited to make the financial system transparent; free of any suspicions.

Jarus:

@Mikeansy,

But when a CBN Governor goes on National Newspaper to suggest that some Banks may be at risk even before auditing, that creates panic and that is irresponsible because it is capable of triggering flight of investment from the country.
He should audit these Banks, help those who might have issues take corrective measures quietly.

Do you rather they panic or have an unexpected bubble due to false financial reporting and massive fraud in the banking industry?
Central bank governors do move market and in my opinion it's actually very good/healthy for the market valuation and pricing as most moves are only temporary.

Jarus:

@Mikeansy,

But when a CBN Governor goes on National Newspaper to suggest that some Banks may be at risk even before auditing, that creates panic and that is irresponsible because it is capable of triggering flight of investment from the country.
He should audit these Banks, help those who might have issues take corrective measures quietly.

Do you rather they panic or have an unexpected bubble due to false financial reporting and massive fraud in the banking industry?
Central bank governors do move market and in my opinion it's actually very good/healthy for the market valuation and pricing as most moves are only temporary.

jay bee:

Do you rather they panic or have an unexpected bubble due to false financial reporting and massive fraud in the banking industry?
Central bank governors do move market and in my opinion it's actually very good/healthy for the market valuation and pricing as most moves are only temporary.

25 Billion capitalization was not for the sake of it, its some kind of insurance measure. Any bank that goes bust will be doing so the the bank's own risk. However panic is capable of creating a crisis of its own.

PapaBrowne:

Hmmmm! I have my fears!
Mikeansy has made a very valid point.

The CBN Governor has a duty to protect the banking system.
Being tough is OK, but talking tough on the pages of the media is not a good sign at all.
They haven't done the audit and he is speaking like he already knows the results. I fear the outcome.
I already feel like pulling my funds out of the system.

The banking system currently is filled with cooked up figures- True! But I bet you, cooked up figures are much better than having a system where there is low public confidence.

Sincerely,there's got to be some crude agenda.
I'm not a fan of ethnic profiling and I don't usually like commenting on ethnic issues, but I must say this one:
The North lost out drastically in the Banking sector and it wants badly to get back in. Of the 24 banks in the country, only one is owned by, or headed by a northerner. And that one is Unity bank- the smallest and least successful bank in the country.

When he opens up the banks to foreign ownership, Arab money moves in to take over majority of the banks!
It sounds very stupid, but I had to add that, cos I know its a fact and that's the agenda!

even you know

and if there was a northerner agenda he'd have been working for union or unity bank!

I'm not a fan of ethnic profiling and I don't usually like commenting on ethnic issues, but I must say this one:
The North lost out drastically in the Banking sector and it wants badly to get back in. Of the 24 banks in the country, only one is owned by, or headed by a northerner. And that one is Unity bank- the smallest and least successful bank in the country.
When he opens up the banks to foreign ownership, Arab money moves in to take over majority of the banks!
It sounds very stupid, but I had to add that, cos I know its a fact and that's the agenda!

Much as I do not want to reopen the overdiscussed issue of Sanusi & Northern agenda, I found the above too ridiculous to leave unreplied.

True, some northerners are displeased with the fact that the country's banking system in dominated by Southerners, but if you know the man Sanusi Aminu Lamido Sanusi, you will definitely not utter this statement. If the north truly have that agenda, then they have picked a wrong person in SLS. He cannot be remote-controlled. This Sanusi is not the next door aboki. I can vouch for his depth of brilliance and discipline.

Dis Guy:

even you know

and if there was a northerner agenda he'd have been working for union or unity bank!

Well said Dis Guy. This is a man that rose through the ranks in UBA to become GM, a man that received phone call(sort of begging) from First bank to come and be an Executive Director without lobbying, and after a couple of years, given GMD ahead of even that had been on the board before him. Are these northern banks?
T'omo ba dara e je kaawi. SLS is a rare breed Fulani man.

mikeansy:

25 Billion capitalization was not for the sake of it, its some kind of insurance measure. Any bank that goes bust will be doing so the the bank's own risk. However panic is capable of creating a crisis of its own.

Capitalization only gives you more funds to play with, and is more of a buffer than an insurance policy. It even becomes less of a buffer when you start to play with bigger marbles. If your are cooking your books means you are very likely not doing well and are trying to hide it. Increased capitalization will not change that.

Jarus:

Much as I do not want to reopen the overdiscussed issue of Sanusi & Northern agenda, I found the above too ridiculous to leave unreplied.

True, some northerners are displeased with the fact that the country's banking system in dominated by Southerners, but if you know the man Sanusi Aminu Lamido Sanusi, you will definitely not utter this statement. If the north truly have that agenda, then they have picked a wrong person in SLS. He cannot be remote-controlled. This Sanusi is not the next door aboki. I can vouch for his depth of brilliance and discipline.
Well said Dis Guy. This is a man that rose through the ranks in UBA to become GM, a man that received phone call(sort of begging) from First bank to come and be an Executive Director without lobbying, and after a couple of years, given GMD ahead of even that had been on the board before him. Are these northern banks?
T'omo ba dara e je kaawi. SLS is a rare breed Fulani man.

If there is any Northern agenda about the Banking industry, may be SLS is about to go about it the right way. See the BBC report below

Nigeria may allow bank investment

The move is part of a plan to try and strengthen Nigeria's financial system
Nigeria's central bank has indicated that it is prepared to lift a ban on foreign ownership of its banks.

Restricting outside investment was "not a sustainable policy" the Bank's new governor Lamido Sanusi has said.

Most international banks left Nigeria in the 1970s after military rulers imposed a law part-nationalising banks.

Although there has liberalisation in the sector, only Standard Chartered and Citigroup have re-established large operations in the country.

'Skills'

Currently the central bank must approve the acquisition of more than 5% of a Nigerian bank by a foreign firm.


Why wouldn't I be comfortable with a bank owned by Barclays, of HSBC or China Construction Bank who I know?

Lamido Sanusi
Governor, Nigeria Central Bank
Mr Sanusi said that the previous governor had also imposed a rule that no foreign bank could own more than 10% of a Nigerian one, but that this was "unnecessary" and should change.

Encouraging outside investment is part of a wider plan to shore-up confidence in the country's financial system which had suffered losses during the collapse of local stock markets last year.

"We do need the capital to come in, we do need the skills on, risk management and secondly at this time we may need to recapitalise banks.

"What you want to do is open up all the possibilities," Mr Sanusi said, adding that there was no timeframe for easing the restrictions.

Earlier, in an interview with the Financial Times he said that Nigeria wanted to "try to encourage the foreign banks that are coming, not just with money, but with management and systems, to come in and acquire".

"Why wouldn't I be comfortable with a bank owned by Barclays, of HSBC or China Construction Bank who I know?" he added.

If anybody in the North has any interest to float a Bank, this is an opportunity.
They can either float their own Bank or Liaise with some Foreign Investors to float new Banks.

It was nobody's fault that the Northerners agitating now did not invest when everyone else did. If Dangote decided to float a Bank then, I doubt if anyone would have stopped him.

So long as the system is opened up for anyone to invest and allow competition by all banks, thats ok.
The most cynical thing Sanusi would have done is to try to somehow change ownership of most existing banks to Northerners. So long as he does not do that but allows Northern inspired banks to spring up and compete fairly with everyone else, I don't see why anybody should be worried.

gayigaskia

nl arent meant for zooman like u

gaylord hmm

the stuburn north oh yes are on the verge to do it again, do as it suit them

breakin 10 yrs cbn rules; to let the forigners get their credit crunch hand on our banks

just wonderin

oh yes, i dnt see the reason anyone should worrri

but u will be the first to cry murder when the niger-delta spit fire

idddddddddddddddddddddddotttttttttttttttttts!!