CBN, NDIC, SEC defend AMC bill

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A bill seeking to establish Asset Management Company (AMC) to soak up bad bank loans was yesterday defended by the Central Bank of Nigeria (CBN), the Securities and Exchange Commission (SEC) as well as the Nigeria Deposit Insurance Corporation (NDIC).

NDIC backed the proposed legislation on the grounds that the Asset Management Company will also enhance the capacity of industry regulators to handle the N168.7 billion loan assets of 48 failed banks presently under liquidation. The three regulatory agencies made their positions known in separate presentations at the public hearing on the bill.

The public hearing was organised by the Joint Committee on Finance, Banking and Currency, Capital Market and Institutions of the House of Representatives. In his presentation, Tunde Lemo, deputy governor of the CBN, explained that the AMC was conceived as part of the policy options for implementing the ongoing reform of the banking industry. Lemo said the idea of floating the Asset Management Company came after exhaustive deliberations and consultations by the CBN and the Ministry of Finance during which both parties agreed to subscribe to the N10 billion initial share capital of the company on an equal ratio. He pointed out that the travails of the banking sector in Nigeria followed the global economic meltdown and its impact manifesting in weaker oil prices, weakened domestic currency and the crash of the capital market.

He added that the situation was compounded by the lack of adherence to sound corporate governance practices and resulted in the huge proportion of non-performing loans.

Also making her contribution, Arunma Oteh, director general of SEC, allayed the fears of stock market operators about the Asset Management Bill. On the issue of the guarantee of proper evaluation of eligible banks to be acquired by the proposed company, she said it could be handled in form of regulations, adding that the bill was very essential to the recovery of the capital market. Oteh stated that there has always existed a delicate relationship between the banking sector and the capital market, adding that the banking sector represents about 70 percent of activities in the stock market which exposes the stock market to the vagaries of the banking sector.  Umaru Ibrahim, acting managing director of NDIC, said the establishment of an AssetManagement Company became necessary when the volume of toxic assets in the banking sector reached alarming proportion.

Read more: CBN, NDIC, SEC defend AMC bill

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