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CBN to Implement New Capital Accord Guideline by year-end

By on October 22, 2012

CBN HQ, FCT

 

The Central Bank of Nigeria (CBN) said over the weekend that it is ready to execute a framework on New Capital Accord (Basel II) before the end of the year.

 

This was disclosed by the CBN Deputy Governor, Financial Systems Stability, Kingsley Moghalu, during a conference for bank directors organised by the Financial Institutions Training Centre (FITC) in Lagos

 

Moghalu said the principles would improve transparency and added disclosures in banks’ financial reporting, adding that, it will be achieved when banks fully adopt the International Financial Reporting Standards (IFRS).

 

According to a consultant to the CBN on Basel II and IFRS Implementation Project, Gianfranco Antonio Vento, it is necessary for banks to assess their capital sufficiency positions virtual to their general risks. He pleaded with regulators to re-evaluate and take suitable actions in reaction to those assessments.

 

Vento stated that the Basel standard was intended to make certain that a bank maintains a sufficient level of imaginative, high-quality liquid assets that can be transformed into cash to meet its liquidity needs for a 30-calendar day under a considerably ruthless liquidity pressure situation stated by administrators.

 

“At a minimum, the stock of liquid assets should enable the bank to survive until Day 30 of the stress scenario, by which time it is assumed that appropriate corrective actions can be taken by management and/or supervisors, and/or the bank can be resolved in an orderly way,” he added.

 

He said questionnaires have already been handed to lenders, as CBN staffs are already involved by the local banks.

 

Vento said, the outcome has been the Baseline Survey to underscore the modern in the execution process of Basel II and III in the banking sector, to improve the execution and the following stages for a successful introduction of the new regulatory framework.

 

Banks are also drawn in, in the preparation of a Quantitative Impact Study (QIS) and an inclusive and detailed regulatory structure meant to elucidate and acclimatize the Basel II and III principles to the local framework.

 

“Preparation and review of gap analyses that banks will perform in order to point out their distances from the minimum regulatory standards to be implemented as well as progressive implementation of Basel II and III rules, with a parallel running period in which the existing rules will cohabit with the new framework,” he said.

 

He said banks, which have built internal frameworks and are competent to meet the minimum standards fixed in the new Basel II and III regulatory framework, will be authorized to apply for the confirmation of their models.

 

“By bringing greater market discipline to bear through enhanced disclosures, the Basel capital framework can produce significant benefits in helping banks and supervisors to manage risk and improve stability,” he said.