Ahmed Kuru, managing director of the Assets Management Corporation of Nigeria (AMCON), says the failed bank act needs to be re-introduced to check the resurgence of toxic loans in the banking system.
In his comments whole receiving officials of the Risk Management Association of Nigeria (RIMAN) at the AMCON office in Lagos, Kuru said there is a need for bankers to account for their actions. The RIMAN delegation was led by Magnus Nnoka, its president and chief risk officer, Coronation Merchant Bank.
The failed bank act was introduced in 2004 to guide the recovery of debts owed to failed banks and try offenses relating to financial malpractices in banks and other financial institutions.
The AMCON boss fingered weak risk management framework of financial institutions as the root cause of toxic loans adding that it also caused the failure of the banking system in the 2008/2009 global financial crisis which led to the eventual creation of AMCON.
Kuru said that the trend became a piece of baggage, which contained all sorts of bad omen for the economy including poor corporate governance structure, lack of robust risk management strategy and lack of adherence to laid down principles that govern credit approvals by financial institutions.
“I have been on both sides, therefore, I can authoritatively comment on issues relating to risk management. Immediately after the intervention of the Central Bank of Nigeria (CBN) in 2009, they insisted that risk management must be given prominence right from the Board level to the account officer.
“What we have noticed now is the lack of a consequent framework to manage the risk structure. We have noticed the prevalence of key men risk. Credits are booked with impunity without any intentions of being paid. The grievous impunity is taking place along the credit process.
“There is the urgent need to revisit the failed bank act so that operatives become responsible for their actions. We believe it will bring discipline to the banking industry. AMCON is currently sitting on a huge stock of non-performing loan, with banks looking for liquidity to book more loans. You can clearly see that the system is skewed towards accommodating large credits, which pose serious survival challenges to the financial institutions on failure.”
He told the delegation that obligors and operators should be brought to account for bad credits.