Director-General,West African Institute for Financial and Economic Management (WAIFEM), Professor Akpan Ekpo, has urged banking regulators across the region to pay attention to risk based supervision to safeguard the banking industry from system distress.
Ekpo made this call in Lagos at the regional course on ‘Foundation banking supervision’, organised by College of Supervisors, West African Monetary Zone (WAMZ), in collaboration with WAIFEM.
He said that regulators must have knowledge of risks associated with banking, which include credit/default, foreign exchange, interest rate and liquidity risks. This he said would help them to adopt risk-focused approach to banking supervision capable of repositioning the financial industry for long term growth.
He pointed out thatthe rapid innovations in financial markets and internationalisation of financial flows have changed the face of banking almost beyond recognition, and that technology and deregulation have provided new opportunities for increased competitive pressures among banks and non-banking financial institutions.
“Following tremendous development in technology, financial services are evolving from transactional to information management, and the structure of delivery channels are changing to electronic distribution channels.”
Ekpo stated that this trend has greatly increased the possibilities for contagions as evidenced by the spread of financial crises from Thailand to the rest of Southeast Asia, Eastern Europe, and South America in the late 1990s, and the global financial crisis of 2008.
African banks have increasinglygone global in their operations, the opening offshore subsidiaries and foreign affiliates, the risk-focused banking techniques must be used to prevent collapse in the system, he stated.
The WAIFEM DG argued that risk-focused banking supervision (RFBS) entails development and maintenance of a supervisory plan that is current and relevant to the organisation’s changing risk profile. The implementation of the plan requires overhauling the legal and financial oversight frameworks and changes in the supervisory frameworks of countries within the sub-region.
