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Strengthening Capacity in Banking Supervision in Nigeria

Project Development Objective (PDO)

This project aims to contribute to greater financial stability by strengthening capacity of banks and the Central Bank of Nigeria (CBN) to undertake recovery and resolution plans and improve data quality that allow effective on-site supervision.

Background

As the last global financial crisis has shown, recovery and resolution planning (R&RP) is a crucial element of crisis-preparedness. They allow potential problems to be properly addressed well in advance before the crisis arises. Recovery planning is undertaken by banks, while resolution planning is undertaken by the authorities. Like other supervisors around the world, the practice of developing R&RPs is new to the Central Bank of Nigeria (CBN) and the importance of which, cannot be over-emphasized.

In addition, low quality reporting data by banks does not allow off-site supervision to be performed effectively and has significant implications for on-site supervision, reducing its effectiveness in a risk based supervisory environment. Strengthening the quality of the data reported by the banks will be critical in allowing the CBN to placing greater reliance on a risk-based approach in defining the frequency and content of on-site inspections.

Activities / Output

1. Drafting of recovery and resolution plans (R&RP) for six pilot systemically-important banks
2. Drafting of a general R&RP framework
3. Capacity building of the Authorities in recovery and resolution planning and in identifying the point of non-viability of banks
4. Assessment and capacity building to improve data quality and reporting to banking supervision
5. Strengthened bank reporting practices, and capacity of bank supervisors to identify misreporting and inconsistent reporting

Expected Outcomes

1. Enhanced quality of data submitted by banks to CBN that allow effective off-site supervision and enables the CBN to move towards risk-based supervision
2. Strengthened CBN framework and capacity of CBN staff to review recovery and produce resolution plans