Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, has urged African central bank governors and other financial sector regulators to strengthen their regulatory and supervisory roles to forestall any sudden run on banks in their respective jurisdictions.
A statement from CBN said Emefiele gave the charge on Wednesday at the opening of a two-day conference of the African Central Bank Conference 2023, which ended yesterday.
Speaking on the current global dynamics and specific policy developments in Nigeria to address emerging shocks, Emefiele advised central banks on the continent to draw lessons from the recent failure of Silicon Valley Bank (SVB), and Signature Bank in the United States of America, by putting in place regulations that will prevent any run on banks in their countries.
“A major reason that contributes to bank failures is when the bank is unable to meet depositors’ demand for their money. This usually results to a run. There is a need for regulators to insulate the banking system from collapse,” he said.
He recalled the devastation to lives and livelihoods that was caused by the COVID-19 globally, adding that afterwards economies began to recover again. “The numbers were good and financial market conditions were better.”
However, with the war between Russia and Ukraine, he said the global economy was hit with another crisis. “All the forecasts made by the IMF and World Bank have begun to go south and inflationary pressure began to climb.”
While sharing Nigeria’s experience in regulating banks, Emefiele said threats posed to the financial system necessitated the release of new guidelines and regulations to tackle potential infringements, and in the process, protect depositors’ funds as well as promote greater transparency in the sector.
According to the CBN Governor, regulators must be alive to their responsibilities by ensuring that banks under their regulatory watch are financially healthy and do not suffer a similar fate as the SVB, which, until its collapse recently, catered to many of the world’s most powerful tech investors.
A major reason that contributes to bank failures is when the bank is unable to meet depositors’ demand for their money. This usually results to a run. There is a need for regulators to insulate the banking system from collapse.
