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CBN seeks power to freeze accounts linked to criminals

…advocates special tribunal for non-performing loans

The Central Bank of Nigeria (CBN) is seeking power in new amendment to the Bank and Other Financial Institutions Act (BOFIA) to enable it freeze accounts linked to criminals. The bank, in addition, is seeking for creation of special court to address the issue of non-performing loans. CBN made the appeal yesterday to members of Senate Committee on Banking, Insurance and other Financial Institutions, during a public hearing on its Bill for an Act to repeal the 2004 Act in order to and re-enact the Bank and Other Financial Institutions Act 2020.

The apex bank’s Director, Legal Services, Kofo Salam- Alada, made the submissions to the Senate. He said fraud and other financial crimes would be greatly tamed by giving CBN the power to apply to the court for orders to freeze accounts, which are linked with criminal and other civil infractions.

He lamented that this power was omitted in the Bill inadvertently in the current Act. “As part of measures to address the role of nonperforming 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 and enforcement of rights over collateral securities. “Several new types of licensed institutions have entered the Nigerian financial services sector since the enactment of the 1991 Act.

These include the non-interest banks, credit bureaux, payment system service providers, among others. “There is a compelling need to introduce new provisions in the bill to address the unique peculiarities of these institutions,” he affirmed. On CBN intervention powers, he said: “We noted that the powers of the CBN to intervene in the process of managing a failing bank and reinstatement of a bank in a grave situation and bringing it back to sound financial health was omitted in the bill.

“The omission 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.” The CBN, in addition, is seeking an amendment to handling issues of dormant accounts with banks.

“We propose the inclusion of provisions to improve the administration of dormant accounts in the Nigerian banking sector. The provisions 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 apex bank noted. On options for resolving failing banks, he said: “There is a need to expand the options available to the CBN to resolving failing banks and managing systemic crisis without recourse to the public treasury.

In line with international best practices, we recommend the establishment of a resolution fund to pool resources for managing banking sector distress.” In his contribution, the Managing Director, Nigeria Deposit Insurance Corporation (NDIC), Mallam Umaru Ibrahim, said hearing on the bill for a repeal of BOFI Act and its re-enactment by the committee on banking, insurance and other financial institutions was most appropriate step to take in the face of current challenges facing the economy.

“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, and mobile banking. All these speak to the need to have a harder look at BOFIA. “NDIC and CBN are partners working for 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 a presentation by Director, Legal, NDIC, Mr. Bellema Taribo, he said there was a need for legislation to tackle insider abuse dealings in banks.

The corporation also sought the re-enactment of BOFI Act to recognise NDIC along with CBN as co-regulators. He dismissed the push for appointing another liquidator for banks and affirmed that NDIC was the sole liquidator of banks. “NDIC is the sole liquidator of banks. The issue of appointing another liquidator never arises. We need to look at that in re-enacting BOFI Act,” he submitted. Earlier in his opening remarks, the Senate President, Dr. Ahmad Lawan, who was represented by the Deputy Senate Leader, Ajayi Boroffice, described the banking sector as a strong vehicle needed to move the nation forward.

He assured stakeholders present at the hearing that their inputs would not only be absorbed, but also form the major ingredients that will be used to produce the new laws. Also speaking at the event, the Chairman, Senate Committee on Banking, Insurance and other Financial Institutions, Uba Sani, said the bills were critical to the economic stabilisation of the country, even as he hailed the committee members for their efforts thus far.

In his submission, the sponsor of Electronic Transactions Bill, Ibikunle Amosun, said the document seeks to protect all electronic commerce services contracts, approve use of digital signature, provide legal assistance for consumers who use it, promote acceptability of electronic communication for contracts as against physical presence, create uniformity, ensure punishment for offenders and give validity to online contracts, among others. Also speaking, the cosponsor of BOFIA, Betty Apiafi, said the bill aimed to reshape the financial sector for greater efficiency and growth. “It will also help watch list chronic defaulters, who are responsible for the NPLs. It’s a big problem of the financial institutions,” she added.

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