We Cannot Afford Another Financial Crisis – NDIC MD

By Bukola Idowu

The Managing Director and Chief Executive of the Nigeria Deposit Insurance Corporation (NDIC), Alhaji Umaru Ibrahim, has said the Nigerian financial industry cannot afford to have a repeat of the financial crisis of 2008/ 2009.
Speaking at the 2014 sensitisation workshop for operators of primary mortgage banks (PMBs) in Lagos, yesterday, Ibrahim stressed the need for banks in the country to ensure effective risk management to avert the near collapse of some financial institutions during the 2008/2009 crisis.

Delivering his keynote address, Ibrahim said, “Supervisory authorities are deeply concerned about the building up of toxic assets of the microfinance banks (MFBs) which stood at about 45 per cent as at December 2013 as against the prescribed maximum of five per cent.

“It is important to stress that weak corporate governance and risk management frameworks can result in risky behaviors by PMBs and can lead to the creation of huge toxic assets and ultimately put insured deposit at risk.

“Our attention is now focused on both the MFBs and PMBs so as to address the emerging challenges and our efforts can only be successful if the operators can embrace good governance and sound risk management practices.”

Ibrahim, while recalling the role of mortgage institutions in the global financial crisis which originated from the United States, noted that mortgage markets are “inextricably linked to the functioning of the economy.”

Ibrahim urged PMBs to ensure enhanced risk management standards as the sector is sensitive to interest rate, noting that an increase in interest rate can make repayment difficult and result in default which he said may give rise to toxic assets.

He added that only PMBs which have a track record of good corporate governance and risk management will be able to access the facility being made available by the Nigerian Mortgage Refinancing Company (NMRC).

The NDIC boss said that over 60,000 applications for funding were currently being considered by the NMRC, adding that only PMBs with “strong credit underwriting standards underlying a robust enterprise risk management practices” will be able to get the funding from the NMRC.

Culled from: http://leadership.ng