CBN Seeks Legislative Powers To Freeze Accounts Linked To Criminals
The Central Bank of Nigeria (CBN) has approached the Senate to grant it powers to freeze accounts linked to criminals.
The apex bank made the appeal on Wednesday at a Senate Committee’s Public Hearing on the “Bill for an Act to Repeal the Banks and Other Financial Institutions Act (BOFIA) 2004 and Re-enact the Banks and Other Financial Institutions Act 2020.”
The Bank, which was represented at the hearing by Kofo Salam-Alada, proposed to the Senate to reinstate the powers of the CBN Governor “to apply to the court for orders to freeze accounts which are deemed to be linked with criminal and other civil infractions.”
He lamented that this power was omitted in the Bill.
The CBN is also seeking legislation for the Creation of Credit Tribunal to address the issue of non-performing loans.
According to Salam-Alada,“As part of measures to address the role of non-performing loans, we propose the creation of a Credit Tribunal.
“The Overarching objective is to create an efficient regime for the recovery of eligible loans of banks and Other Financial Institutions (ofls) and enforcement of rights over collateral securities.”
Salam-Alada noted that the powers of the CBN to intervene in the process of managing a failing bank, reinstating a bank in a grave situation and bringing the bank back to sound financial health was omitted in the Bill.
This omission, he told the Senate, “erodes the powers of the CBN and creates a huge gap in the regulatory and resolution framework.
“Therefore, we propose that the extant provisions should be reinstated.”
With regards to the administration of dormant accounts in deposit money banks, the CBN asked for the “inclusion of a provision to improve the administration of dormant accounts in the Nigerian banking sector.”
The provisions, Salam-Alada said, “should address such requirements as the criteria for determining dormancy, the processes for managing the funds in dormant accounts and procedure for reclaiming funds by beneficiaries.”
The CBN equally canvassed more powers to resolve failing banks and manage the systemic crisis without recourse to the public treasury.
According to Salam-Alada, “In line with international best practices, we recommend the establishment of a resolution fund to pool resources for managing banking sector distress.”
The Apex bank is also asking for the adoption of additional resolution tools such as bail-in (ensuring that losses are absorbed by shareholders and creditors), sale of the business (allowing the resolution authority to sell all or part of the failing bank to a private acquirer) and asset separation (isolating the “bad” assets of the bank in an asset management vehicle for orderly wind down, if immediate liquidation is not justified in current market conditions).
Addressing the Senate Committee as well, the Managing Director of the Nigeria Deposit Insurance Corporation (NDIC), Alhaji Ibrahim Umar, said the Bill for a repeal of BOFI Act and its re-enactment by the committee on banking, insurance and other financial institutions was an appropriate step to take in the face of current challenge facing the economy.
According to him, “A lot has happened since 2004 to the banking sector. A lot has been put in place to make it efficient, a lot has taken place by way of introducing new products, agent banking; mobile banking. All these speak to the need to have a harder look at BOFIA.”
Going forward, the NDIC boss said the Corporation and CBN would continue to collaborate to achieve an efficient and healthy banking system.
“We agree to disagree with CBN on certain issues. The two institutions have come a long way on shared responsibilities” he said.
In his presentation, NDIC’s Director, Legal Department, Mr. Bellema Taribo, sought the Senate’s support to recognize NDIC along with CBN as co-regulators since NDIC is already a co-supervisor of banks with the CBN.
He pleaded to the Senate for legislation to tackle insider abuse dealings in banks.
He dismissed the clamour for the appointment of another liquidator for banks insisting that the NDIC is the sole liquidator of banks.
According to him, “NDIC is the sole liquidator of banks. The issue of appointing another liquidator should never arise. We need to look at that in the re- enacted BOFI Act.”
Earlier in his opening remarks, Senate President, Ahmed Lawan, who was represented by the Deputy Senate Leader, Robert Ajayi Boroffice, assured stakeholders at the hearing that their inputs will not only be absorbed but will form the major ingredients that will be used to produce the new laws.
On his part, the Chairman, Senate Committee on Banking, Insurance and other Financial Institutions, Uba Sani said the bills were critical to the economic stabilization of the economy.
He said the BOFIA review was long overdue, adding that it will prevent future bank distress and tackle sharp practices.
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