• Monday, March 04, 2024
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Silicon Valley Bank collapse, lessons for Nigerian regulators – NDIC

Fed review pins blame for SVB failure on Trump-era rule changes

The collapse of Silicon Valley Bank, Signature Bank and Credit Suisse provides valuable lessons for regulators/ supervisors and bank executives in Nigeria and around the world, according to the Nigeria Deposit Insurance Corporation (NDIC).

Mustapha Ibrahim, executive director (operations), NDIC, said this advice at the Chartered Institute of Bankers of Nigeria (CIBN) advocacy dialogue series 7.0, held physically and virtually.

He said by prioritizing risk management, responsible lending practices, market awareness, and collaboration with regulators, Nigerian banks can help to ensure that they are operating in a sustainable and responsible manner while supporting the growth of the local tech and start-up industries.

On the part of regulators, Ibrahim said effective regulation and supervision of banks has the potential to make banks less likely to fail and also contribute to the stability and robustness of the financial systems.

According to him, timely and effective resolution of failing or failed bank is imperative to sustain public confidence in the banking system, adding that delay in taking prompt corrective action(s) increases the cost of resolution.

“The resolution authority must be supported by the judicial system in handling failed bank cases, particularly in asset realisation in the interest of depositors. There is a need for cooperation and collaboration of all the safety-net participants,” he said.

Ken Opara, president/chairman of Council, CIBN, said the CIBN advocacy dialogue series is a thought-leading programme created to empower various stakeholders with knowledge on emerging issues affecting the banking industry and the economy.

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The series, he said, typically features subject matter experts and operators with the aim to generate ideas that can help individuals and organizations make better and informed decisions amid challenges in matters relating to banking, finance, and the economy at large.

Speaking at the event, Godwin Emmanuel Oyedokun, professor of accounting and financial development, department of management and accounting, Faculty of management and social sciences, Lead City University, Ibadan, said the latest bank failure shines a spotlight on financial regulation but given the added context of the global tech industry, more questions need to be asked around the way tech is funded and why traditional financial institutions appear unwilling to meet the capital needs of start-ups.

Ibrahim said despite all the post-Global Financial Crisis reforms, including those introduced specifically for systemically important financial institutions, Credit Suisse collapsed.

“There can come a point where a lack of confidence in a bank (for whatever reasons) results in an unsustainably large withdrawal of deposits, be they retail or wholesale. There is the need to understand how liquidity pressures might arise; to assess whether a financial institution’s recovery plans could provide a credible response to liquidity pressures; and to consider how the institution’s assets and liabilities could be structured, and funding commitments from third parties could be put into place, to provide greater protection against funding stresses,” he said.