Creating a Healthy Financial System through Regulation By Dr. Kingsley C. Moghalu Deputy Governor, Financial System Stability Central Bank of Nigeria

Creating a Healthy Financial System through Regulation A brief perspective on global financial issues  What triggered the latest global financial crisis  The unprecedented contagion effect  Cost of the crisis - IMF projection within G20: $11.9 trillion ( £7.1 trillion ) Approx 1/5 th of entire global annual economic output 2

Creating a Healthy Financial System through Regulation Cost of the crisis – in context: Source: globalissues.com - BBC, Bloomberg, UPI 3

Creating a Healthy Financial System through Regulation What happened in Nigeria ?  Factors that tipped us into crisis: Macro-economic instability caused by unstable oil prices and large and sudden capital inflows Excessive exposures of banks to the capital market Major failures in corporate governance at banks Lack of investor and consumer sophistication Inadequate disclosure and transparency about financial position of banks 4

Creating a Healthy Financial System through Regulation What happened in Nigeria ?  Factors that tipped us into crisis (cont’d): Critical gaps in regulatory framework and regulations Ineffective supervision and enforcement by the CBN Weaknesses in the business environment 5

Creating a Healthy Financial System through Regulation Broad Outline of Ongoing Reforms - #1 Enhancing the quality of banks  Remedial programs  Risk-based supervision  Regulations and regulatory framework reforms  Consumer Protection  CBN Internal reforms 6

Creating a Healthy Financial System through Regulation Broad Outline of Ongoing Reforms - #2 Establishing financial stability  Asset Management Corporation of Nigeria (AMCON)  Bank mergers and acquisitions 7

Creating a Healthy Financial System through Regulation Broad Outline of Ongoing Reforms - #3 Enabling healthy financial sector evolution  Review of Universal Banking  Active support for development and deployment of scalable infrastructure 8

Creating a Healthy Financial System through Regulation Broad Outline of Ongoing Reforms - #4 Ensuring the financial sector contributes to the real economy  Leveraging the CBN Governor’s role as adviser to President on economic matters  Measuring the relationship between the real economy and financial sector and the transmission mechanism  Evaluating the effectiveness of development finance  SME development 9

Creating a Healthy Financial System through Regulation Conclusion Nigeria is a developing country with a financial system that requires strict and smart regulations that drive institutionalization of appropriate risk management models, corporate governance, qualitative disclosures, consumer and investor protection and ensures adequate support for the real sector that will grow the economy. 10

Thank you 11