Jarus you can choose who to argue with that is your business

But the facts are the facts. If the so called specialists are that special Customers will choose them over a one stop shop.

It should not be up to CBN to legislate on Banks encroaching in their territory.

I thought we were a free market economy?

Jarus:

He still ended honourably, to me. You can't force somebody to go into an area he doesn't like.

With that same principle u should not prevent businesses to diversify

It is sad to see Nigerian fail to grasp the facts nor do due diligence before making comments on an issues.

Universal Banking, UB means that a bank is involved in more than one segment of the market e.g. commercial, investment etc.  It was introduced in 2001 by Joseph Sanusi (and not Soludo) via the UB license which allowed a bank to operate in any or all of the segments as it desired without further approval from the CBN.

History:
1. Pre  2001: Bank were granted specific licenses and were only allowed to operate in one segment and thus we had Commercial banks, Merchant/Invest Banks, etc
2. 2001 till date: UB license was the only license and made it possible for bank to carry out universal banking

Proposal:
1. The current scheme has only the UB licensing which allows any bank to operate in any segment. This in turn means that all banks must meet the requirement for the UB license (which encompasses all) even if they have no intention of participating in all the segments i.e. a 'one size fits all' approach. This has made it difficult for new entrants into the sector and has resulted in marginalization of some segments like rural banking.
2. The CBN and Bankers committee are moving towards an hybrid system, in which the banks are allowed to practice universal banking, but removes the single UB license regime. Any bvank that wants to operate in multiple segments simply needs to meet the requirements for each segment and get the associated license, which is different from pre-2001 when you couldnt even if you wanted to, while newer, smaller or specialized banks can just meet the requirements, get the licenses they need to operate in the segments they are interested in (and they dont need to come up with N25B if the segment doesnt require it). The move essentially brings back the targeted licensing regime, without taking away the UB banking practice.

I personally see it as a very positive move that recognizes that UB licensing is not tied to UB practice, and is similar to what obtains in places like SA.

give me a link to read that proposal

not been able to read this thing but it makes sense if what they are proposing is what you stated
that makes sense

This is old news.

This was announced 2 months ago.

Mr Sanusi -Face your work. They will understand later.

Ibime:

This is old news.

This was announced 2 months ago.

for real?
just hearing it officially from the CBN chaps

nyways, i havent been able to read the whole thing to get a grasp of what will happen
Biina has given me an idea and i think it makes a lil sense

@Biina. Thanks for the heads up.

If what you're saying is actually the operational framework for the banks post-UB license era, then it makes a lot of sense.

If there is any shred of truth in what Binna is saying, there won't be any need to phase out UB licences.

All you will need are specialized licences for Financial Institutions who want to run specialized services.

I am of the view that it is possible to have These specialized institutions running alongside Universal Banks.

But what Sanusi is trying to do is to pick and choose for banks like UBA and Intercontinental what Business Interests they can pursue and what they can't. All he needs to do to achieve that is to deny them licences or withdraw certain licenses if they aready have them.

This is not monetry regulation, this is just the kind of behaviour you witness with dictators because they want to ration who gets what. Thats unacceptable because ours is a free market economy.

This is pure communism.

OYB_MEND:

But what Sanusi is trying to do is to pick and choose for banks like UBA and Intercontinental what Business Interests they can pursue and what they can't. All he needs to do to achieve that is to deny them licences or withdraw certain licenses if they aready have them.

This is not monetry regulation, this is just the kind of behaviour you witness with dictators because they want to ration who gets what. Thats unacceptable because ours is a free market economy.

This is pure communism.

Do you really believe that the decision to deny or withdraw licenses is solely made by the Governor of CBN? Do you actually believe that there will not be publicly announced parameters for obtaining these licences? Are you aware that the USA, arguably the freest market economy, has thousands of regulations for conducting businesses and that virtually every industry is regulated? I'm not really following your reasoning.

The economy of any country is a system. Every system designer will tell you that there are 3 phases for most systems. INFANCY, MATURITY AND RE-INCARNATION.

At Infancy you emphasize on growth through encouraging creativity and innovation. Though creativity and innovation comes with some risk but the trade off is the danger of not growing at all which is simply unacceptable.
If you emphasize control too much at a system's infancy you stiffle growth.

Now when the system is matured you empasize more on controlling risk in order not to crash the system. At this stage you have a lot to loose if the system crashes and as control is necessary while encouraging measured creativity in order to remain competitive.

It is my view that because our economy is yet to be diversified, highly dependent on oil and weak on many other fronts. It is at the infancy stage in the system cycle and what is most important at this stage is creativity and enterprise in order to build a vibrant economy. YOU HAVE TO BUILD AN ECONOMY FIRST BEFORE YOU MANAGE RISK.

Since Sanusi came into office all he has talked about is Risk, Risk, Risk. What about GROWTH

This business of controlling what businesses banks can go into will stiffle growth and I am not suprised with this summary of Fitch report for 2010 below.

Fitch report on Nigerian Banking Sector update




March 17, 2010 11:15AM
 print  email  





Fitch Ratings says in a report published today that it expects Nigerian banks' earnings to remain under pressure in 2010 due to a continued challenging operating environment. The financial performance of most Nigerian banks was significantly affected during the financial period ended September 2009 by the weaker operating environment and the Central Bank of Nigeria's (CBN) [CBKNG.UL] special examination process which required banks to reclassify a significant proportion of loans as non-performing and to raise appropriate provisions in line with their findings.


"Despite the recognition of most of the system's problem assets as a result of the CBN's special examination process, Fitch expects that asset quality will continue to weaken as loan books season after several years of rapid credit growth," says Anthony Walker, a Senior Director in Fitch's Financial Institutions Group. "This could translate into further impairment charges; however, the agency expects these charges will be less pronounced than the impairment charges that arose from the recent CBN special examination process. Overall levels of financial performance will also be affected by the ability of banks to manage their operating costs against the background of a slower operating environment, with significantly lower levels of growth in net interest and non-interest income."

Given the extent of asset quality issues affecting the sector, Fitch awaits details of how a new government-backed Asset Management Company (AMC) intends to absorb the non-performing assets from Nigerian banks and the anticipated pricing of these transactions. "The agency expects the AMC may play a significant role in restoring asset quality indicators in the sector to more acceptable levels and in doing so, prepare failed banks for recapitalisation, acquisition and/or merger with other Nigerian banks," says Denzil De Bie, a Director in Fitch's Financial Institutions Group.

The full report, entitled "Nigerian Banking Sector Update", is available on the agency's website at www.fitchratings.com.

http://234next.com/csp/cms/sites/Next/Home/5542062-146/fitch_report_on_nigerian_banking_sector.csp

ndu_chucks:

Do you really believe that the decision to deny or withdraw licenses is solely made by the Governor of CBN? Do you actually believe that there will not be publicly announced parameters for obtaining these licences?

In the light of the fact that this same CBN Governor sacked bank CEOs without due process. I think denying people licences for whatever made up reasons is a lot easier

Are you aware that the USA, arguably the freest market economy, has thousands of regulations for conducting businesses and that virtually every industry is regulated? I'm not really following your reasoning.

Yes there are regulations in US and we also want regulations here but there is no world major economy phasing out Universal Banking. Ben Bernanke has not told anyone not to engage in Universal banking because of recession. neither has Mervin King. so where does Sanusi learn his own economics from?

biina:

It is sad to see Nigerian fail to grasp the facts nor do due diligence before making comments on an issues.

Universal Banking, UB means that a bank is involved in more than one segment of the market e.g. commercial, investment etc.  It was introduced in 2001 by Joseph Sanusi (and not Soludo) via the UB license which allowed a bank to operate in any or all of the segments as it desired without further approval from the CBN.

History:
1. Pre  2001: Bank were granted specific licenses and were only allowed to operate in one segment and thus we had Commercial banks, Merchant/Invest Banks, etc
2. 2001 till date: UB license was the only license and made it possible for bank to carry out universal banking

Proposal:
1. The current scheme has only the UB licensing which allows any bank to operate in any segment. This in turn means that all banks must meet the requirement for the UB license (which encompasses all) even if they have no intention of participating in all the segments i.e. a 'one size fits all' approach. This has made it difficult for new entrants into the sector and has resulted in marginalization of some segments like rural banking.
[b]2. The CBN and Bankers committee are moving towards an hybrid system, in which the banks are allowed to practice universal banking, but removes the single UB license regime. Any bvank that wants to operate in multiple segments simply needs to meet the requirements for each segment and get the associated license, which is different from pre-2001 when you couldnt even if you wanted to, while newer, smaller or specialized banks can just meet the requirements, get the licenses they need to operate in the segments they are interested in (and they dont need to come up with N25B if the segment doesnt require it). The move essentially brings back the targeted licensing regime, without taking away the UB banking prac[/b]tice.

I personally see it as a very positive move that recognizes that UB licensing is not tied to UB practice, and is similar to what obtains in places like SA.

Thank you.

OYB_MEND:

In the light of the fact that this same CBN Governor sacked bank CEOs without due process. I think denying people licences for whatever made up reasons is a lot easier

Correct me  if I'm wrong, but wasn't the sacking of the CEOs within the legal authority of the CBN. So far, none of the sacked CEOs has been able to reverse the sack because there was nothing illegal about it.

OYB_MEND:

Yes there are regulations in US and we also want regulations here but there is no world major economy phasing out Universal Banking. Ben Bernanke has not told anyone not to engage in Universal banking because of recession. neither has Mervin King. so where does Sanusi learn his own economics from?

You sound as if all the activities involved in universal banking have been banned by Sanusi.  That's not the case as I understand it.  Banks are still allowed to practice universal banking, within the new licensing framework as opposed to the current single UB license regime.

Na only God knows what d intention of Sanusi is! God help us and save us from SLS evil plan.

naijatoday:

Thank you.

Good point, but i think really seperating banks
will not really help at this point.
Banks in Nigeria need to Develop both a strong and
sustainable Commercial & Investment banking arm
I believe Nigerian Banks can handle both arms of banking
properly and effectively.
Barclays bank has both a commericial &
Investment banking arm (Barclays Capital).
But i guess this is not just an overnight decision as
most of these major banking moves are heavily influenced
by the BIS (Bank for International Settlements) or Basle rules

If one whats to dig a little deeper, they could google Nigerian Banks
and Basle Accord rules etc

This whole process seems to be a good step in the right direction. But SLS is rigid in this move and not taking the risk a true banker would take. Reforming the system doesn't mean he should completely phase out universal banking.

Well, lets see how all of this reform plays out 5 years from now.

GOD BLESS NIGERIA

Thats if we are not in a totally different set of reform 5 years from Now!!!!!!!!!

We will reform, reform and reform the reform that led to the reform.

That tells me nothing but instability. I don't know a Foreign Investor who wants to put his money in a market he can not predict.

OYB_MEND:

If there is any shred of truth in what Binna is saying, there won't be any need to phase out UB licences.

All you will need are specialized licences for Financial Institutions who want to run specialized services.

I am of the view that it is possible to have These specialized institutions running alongside Universal Banks.

But what Sanusi is trying to do is to pick and choose for banks like UBA and Intercontinental what Business Interests they can pursue and what they can't. All he needs to do to achieve that is to deny them licences or withdraw certain licenses if they aready have them.

This is not monetry regulation, this is just the kind of behaviour you witness with dictators because they want to ration who gets what. Thats unacceptable because ours is a free market economy.

This is pure communism.

I am agreeing 100% with you on this. Mikeansy also laid down the basic logic here: you need an economy first before controlling risk. Our economy is still near primitive in terms of sophistication and size and what is needed is pure market driven solutions. This Sanusi has nothing to offer along that line. We already know where this lead: back to pre-consolidation days where banks mushroom. Pure retrogression.

mikeansy:

The economy of any country is a system. Every system designer will tell you that there are 3 phases for most systems. INFANCY, MATURITY AND RE-INCARNATION.

At Infancy you infansize growth through encouraging creativity and innovation. Though creativity and innovation comes with some risk but the trade off is the danger of not growing at all which is simply unacceptable.
If emphasize control too much at a system's infancy you stiffle growth.

Now when the system is matured you empasize more on controlling risk in order not to crash the system. At this stage you have a lot to loose if the system crashes and as control is necessary while encouraging measured creativity in order to remain competitive.

It is my view that because our economy is yet to be diversified, highly dependent on oil and weak on many other fronts. It is at the infancy stage in the system cycle and what is most important at this stage is creativity and enterprise in order to build a vibrant economy. YOU HAVE TO BUILD AN ECONOMY FIRST BEFORE YOU MANAGE RISK.

Since Sanusi came into office all he has talked about is Risk, Risk, Risk. What about GROWTH

This business of controlling what businesses banks can go into will stiffle growth and I am not suprised with this summary of Fitch report for 2010 below.

http://234next.com/csp/cms/sites/Next/Home/5542062-146/fitch_report_on_nigerian_banking_sector.csp

Great point mike!

I could have not put it better

Although i be wary of all these rating agencies
analysis of countries ir Small & poors, Moodys & Fitch.
They did rate those Mortgage bonds (Sub-prime) AAA and look
what  happened to the financial system in the USA when investors
found out they were more useless than Junk Bonds!

I am soo in tune with you on the diversification point

Thers more in Nigeria than oil! We have not even used 1% of the
Natural Gas we have got!!!

Keep up the post mike, i love the way you think!

Onlytruth:

I am agreeing 100% with you on this. Mikeansy also laid down the basic logic here: you need an economy first before controlling risk. Our economy is still near primitive in terms of sophistication and size and what is needed is pure market driven solutions. This Sanusi has nothing to offer along that line. We already know where this lead: back to pre-consolidation days where banks mushroom. Pure retrogression.

Spot on! Hit the Nail on the head!!!
It so easy to see and the truth is a Banker
who is worth his salt is a businessman who know
how to look at the bare facts of a business deal
do his own due diligence and come up with
an investment decision that helps the Parties involved
in the Movemnet of Goods and services, short term trade (Commercial banks)
or makes a decision on Capital Intensive Investments, Mid to long term
business ventures etc, Infastructure projects etc (Investment banking)

Its a no brainer when you look at it at the pure business bones
but when the Corporate Flesh and Politcal fat gets wrapped around Banking decisions
thats when the Body of Banking get sloggish, lazy and acts more
as a hindrance to business than a facilitator to aid business/economic growth!

E bi like say dis SANUSI of a man has lost focus, he actually wan destroy the banking industry

Sanusi should have been allowed to run First Bank for like 5years and lets see how the bank will progress before we hand him the rest of the economy.

This man was appointed on account of being a bank CEO. But he was bank CEO for only 5 MONTHS!!!!!!

He is clearly running the CBN like a risk manager. he is looking at just once variable in this multi-variate equation and not considering any other factor.

He simply can't see the big picture.

I really want to go to sleep and wake up in 4years time when he is gone!!!!!!!!!

The title of this thread is misleading to say the least.

Another much ado about nothing.

tkb417:

for real?
just hearing it officially from the CBN chaps

This was announced 2 months ago when Sanusi was revealing his "4 pillars of banking reforms".

Jarus:

He still ended honourably, to me. You can't force somebody to go into an area he doesn't like.

Atedo Peterside is still the chairman of Stanbic IBTC Plc, correct me if i'm wrong. I think he's still very much active in the scene. And besides, with newbranches currently springing up all around Lagos (many are still under construction), i think the bank doesn't intend to sit on the fence in terms of commercial banking (personal & business banking) but of course we know their strong points still remain investment banking and wealth/asset management. They are the only bank among the 24 or so banks that is a Pension Fund Administrator (PFA).

Sanusi, the TERRORIST BANKER!

sleekymag:

Atedo Peterside is still the chairman of Stanbic IBTC Plc, correct me if i'm wrong. I think he's still very much active in the scene. And besides, with newbranches currently springing up all around Lagos (many are still under construction), i think the bank doesn't intend to sit on the fence in terms of commercial banking (personal & business banking) but of course we know their strong points still remain investment banking and wealth/asset management. They are the only bank among the 24 or so banks that is a Pension Fund Administrator (PFA).

Yes, he is still the Chairman of StanbicIBTC, but that's a non-executive position.

[s]Had very brief discussion with him inside elevator yesterday[/s]

Jarus:

Yes, he is still the Chairman of StanbicIBTC, but that's a non-executive position.

[s]Had very brief discussion with him inside elevator yesterday[/s]

At least he still has his hands in the Nigerian financial pie. He also still has his shares (no be small tin o). Besides he could leverage his time for many other productive things, not to forget he's also on the board of other companies,

btw, what did you guys discuss?

Had very brief discussion with him inside elevator yesterday

see name dropping

I think @biina,was just sheding light on the licensing aspect of the proposed proposal.Mr.Sanusi is emphasizing on the operational procedures of the future types of banks,and from what i understood from his proposal,a commercial bank would never be an investment bank and vice-versa.its very obvious that diversification reduces risk and operational cost,while maximazing the use of assets(capital).

The issue I suspect CBN might have with the UB license is that a bank can move in and out of segments without further recourse to the CBN.This makes supervision and auditing more difficult, as opposed to a streamlined license, under which I expect you to continuously practice with the license or risk losing it. I think they should be able to keep the all-in-one license (even if under a different name) and might just need to define new requirements for it, though I think such details are less relevant, as any bank who desires can acquire as many licenses as it wants.

As to growing an economy and its different stages, Mikeansy's earlier post is a bit misleading. First, the banking sector is not the entire economy, and the CBN is only regulating the banking sector. Lack of diversity is a problem with the entire economy,not the banking sector. Secondly, the move to the new licensing regime, will likely open the door for new participants in the sector, allowing a bank to grow from a regional scope to a national scope, or move into new segments as its resources and expertise grows. Will this not diversify and help economic growth in the sector?

Following Mikeansy's illustration, do you train your child good manners at infancy or wait till he is matured? I have never seen a grown man learn new manners. I disagree that in the name of development, we should let things run haywire. If we do so, what you would have is bubble-and-bust cycles. This is evidence by the recent dot.com bust and the current financial recession. Poor regulation is a recipe for disaster, and at the end, the public often ends up paying for the excesses of a few. A house should be built on a solid foundation,and not trying to solidify the foundation after the house is built.

Vladmir 2:

I think @biina,was just sheding light on the licensing aspect of the proposed proposal.Mr.Sanusi is emphasizing on the operational procedures of the future types of banks,and from what i understood from his proposal,a commercial bank would never be an investment bank and vice-versa.its very obvious that diversification reduces risk and operational cost,while maximazing the use of assets(capital).

Like it did with the recent collapsed institutions in the US?