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AMCON: DMBs, CBN to contribute to Banking Sector Resolution Cost Fund

By BusinessNews Staff on May 10, 2015

Deposit money banks (DMBs) in Nigeria will be required to make contributions of 50 basis points of their total assets to the Banking Sector Resolution Cost Fund, the Senate Committee on Banking, Insurance and other Financial Institutions has said.

Their contributions will, however, be based on their audited financial statements, in addition to N50 billion from the Central Bank of Nigeria (CBN) annually for 10 years.

This was contained in the report of the Asset Management Corporation of Nigeria Amendment Bill passed on Thursday.

The committee noted that the total contribution to the Fund stood at N293.41 billion as of December 31, 2013.

Presenting the report, chairman, Senate Committee on Banking, Insurance and other Financial Institutions and sponsor of the bill, Bassey Otu, said the Fund would stand as additional safety during un-predictabilities.

According to him: “Future banking resolution cost, which may result from operational and financial mismanagement by the deposit money banks, will not be borne by the Nigerian tax payers, instead by the banks with money from the Fund”.

This, he said, would strengthen AMCON’s operations and serve the statutory purpose for which it was created.

He stated that the passage of bill will not only correct the defects in the extant Act but also strengthen the banking system for enhanced performance.

The senator stated that it will also enhance AMCON’s management of acquired assets in order to obtain best financial returns thereby keeping the fiscal cost to the government at the barest minimum.

“There is a very expectation from operators of the financial sector that the establishment of a Banking Sector Resolution Cost Fund would enhance financial system stability and boost confidence and as well act as a fiscal buffer by providing a ready source of assets that could be used to meet the cost of future bank failure without any recourse to the use of public funds”.

Recall that the Asset Management Corporation of Nigeria (AMCON) was established by an Act of the National Assembly in 2010 to serve as a special purpose vehicle in the banking industry.

The amendment bill is meant to remove certain ambiguities from that Act that impede the operations of AMCON in carrying out its mandate.

Specifically, the bill seeks to amend Sections 2(3), 16(5), 34(1), 34 (2), 35, 46(2), 48, 60, 61 and 62 of the Act.

Commenting on the passage of the bill, deputy Senate president Ekweremadu said the commitment of the Senate to the passage of the bill was to sustain a stable economic system.

He said: “We finally fine-tuned the AMCON Bill to make it more operational and to add value to the work they are doing. We believe we have covered all the lapses existing in the AMCON Bill with this amendment”.

[Business Day]

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