- Advertisement -spot_img
28.2 C
Lagos
HomeTop NewsNigeria plans N14 bln Banking sector distress resolution fund

Nigeria plans N14 bln Banking sector distress resolution fund

- Advertisement -spot_img

Nigeria plans to create a new resolution fund to support failing or distressed financial institutions with existing banks contributing to the pool of funds, according to the newly signed Bank and Other Financial Institutions Act (BOFIA) 2020.

The BOFIA signed last week by President Muhammadu Buhari was in response to developments in the financial sector over the past 20 years.

The new banking industry regulations make provision for the Central Bank of Nigeria (CBN) to N10 billion while the Nigerian Deposit Insurance Corporation (NDIC) is expected to contribute N4 billion.

Other financial institutions are also expected to contribute the equivalent of their annual 10 basis points of their total assets into the fund.

Banks will be compelled to pay the stipulated amount annually to the resolution fund, without which they will not be allowed to pay dividends to their shareholders.

READ ALSO: Nigeria to ensure comprehensive justice for victims of #endsars violence

The regulatory bank is allowed the laxity to determine the commencement date for the distress resolution fund takes off.

Nigeria set up the Asset Management Corporation of Nigeria (AMCON) in 2010 to help stabilise the banking sector after a $4 billion bailout of eight lenders in 2009.

Prior to that, distressed banks were left to fail while the NDIC stepped in to refund trapped depositors to the customers of the failed banks.

AMCON, due to be wound up in 2023, has acquired a total of N3.7 trillion in bad loans from 22 lenders and has recovered more than 1 trillion naira. It owes N4 trillion to the central bank, its guarantor.

The new law grants more powers to the central bank in managing any crisis. The regulator can step in where a lender is unable to meet its obligation or becomes insolvent. It can transfer the assets of a failed lender to new purchasers.

Join Our Mailing List!

* indicates required
- Advertisement -spot_img
- Advertisement -spot_img
Must Read
Related News
- Advertisement -spot_img