Banking Regulation in Nigeria

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Questions and Answers

What does the term 'director' encompass in this context?

Any employee of the bank, including clerical staff

The director's immediate family and companies linked to the director (correct)

Other directors in different banks and financial institutions

Only the person who holds the title of director

Under what circumstance can the Governor order a special examination of a bank?

If the bank has been performing exceptionally well

If there is a need to increase the bank's capital

If the bank wants to change its management structure

If it is in the public interest to investigate the bank's affairs (correct)

What situation warrants the intervention powers of the Governor in a failing bank?

The bank has recently increased its profits

The bank is likely to become unable to meet its obligations (correct)

The bank is planning to expand its services

The bank has received a favorable audit report

Which of the following is NOT a condition under which a special examination can be ordered?

The bank it is not meeting marketing targets (D) Signup and view all the answers

Which of the following describes a scenario where the Governor can exercise intervention powers?

The bank is insolvent (C) Signup and view all the answers

What is one of the primary purposes of the regulator's supervision of licensed banks?

To ensure compliance with requirements (A) Signup and view all the answers

Which of the following is NOT a prudential requirement imposed on banks?

Maintaining a high interest rate (C) Signup and view all the answers

What does the Banks and Other Financial Institutions Act (BOFIA) primarily regulate?

Regulation of banks and other financial institutions (B) Signup and view all the answers

What requirement must a company meet to engage in banking business in Nigeria?

It must hold a valid banking license issued by CBN (A) Signup and view all the answers

Which activity is part of the failure resolution processes for banks?

Handling distress and bank failure (D) Signup and view all the answers

What is one responsibility of the Central Bank of Nigeria as outlined in BOFIA?

Imposing corporate governance standards (A) Signup and view all the answers

Which of the following is a component of the regulatory requirements imposed on banks?

Minimum liquidity ratio (A) Signup and view all the answers

What is the main role of market discipline in bank regulation?

To enable depositors to assess risk better (D) Signup and view all the answers

What is the primary objective of the Financial Services Regulation Coordinating Committee (FSRCC)?

To promote coordinated supervision of financial institutions (B) Signup and view all the answers

Which of the following bodies is NOT a member of the Financial Services Regulation Coordinating Committee (FSRCC)?

Nigerian Stock Exchange (NSE) (D) Signup and view all the answers

What led to the creation of the Financial Services Regulation Coordinating Committee (FSRCC)?

The difficulty in mastering multiple regulations and the resultant conflicts (A) Signup and view all the answers

Which of the following is a responsibility of the Financial Services Regulation Coordinating Committee (FSRCC)?

Deliberating on issues faced by members with financial institutions (B) Signup and view all the answers

What does the Companies and Allied Matters Act, 1990 chiefly empower?

Corporate Affairs Commission to oversee company registrations (D) Signup and view all the answers

Which of the following is a challenge created by conflicting regulations in the banking sector?

Arbitrage opportunities (B) Signup and view all the answers

What signifies the legal authority of regulations, circulars, and administrative directives within the financial sector?

They must be complied with by each regulated body (B) Signup and view all the answers

Which body was created to ensure stability in the banking system through effective regulation and supervision?

Financial Services Regulation Coordinating Committee (FSRCC) (C) Signup and view all the answers

What is the primary purpose of the Bank Verification Number (BVN)?

To verify customer identity and prevent fraud (C) Signup and view all the answers

Which of the following initiatives aims to promote financial inclusion?

Mobile money scheme (D) Signup and view all the answers

What do the Basel Accords require from banks?

To maintain certain levels of capital and liquidity (A) Signup and view all the answers

What distinguishes Off-Site Supervision from On-Site Examination?

Off-Site involves analysis of returns, while On-Site is a physical examination of the bank. (A) Signup and view all the answers

Why is banking supervision considered essential?

To ensure banks operate within the law and remain solvent (D) Signup and view all the answers

Which supervisory method is relied upon more in emerging markets?

Off-Site Supervision due to inadequate resources (A) Signup and view all the answers

What is the role of the Central Bank of Nigeria (CBN) in consumer protection?

To enforce regulations on fees and charges (A) Signup and view all the answers

What aspect of banking regulation do the Basel Accords address?

Capital and liquidity requirements (C) Signup and view all the answers

What is the maximum allowable limit for foreign currency borrowing by a bank according to the prudential regulation?

75% of shareholders’ funds unimpaired by losses (D) Signup and view all the answers

Which of the following actions is NOT part of the measures to combat dud cheques in Nigeria?

Provide free credit for past offenders (D) Signup and view all the answers

What is the primary goal of the Know Your Customer (KYC) regulations?

To prevent money laundering and other financial crimes (C) Signup and view all the answers

How long will the names of serial dud cheque issuers be listed in the databases of credit bureaus according to the outlined measures?

Five years (D) Signup and view all the answers

What must banks do regarding reports of unethical conduct by CBN employees?

Submit them anonymously or confidentially (B) Signup and view all the answers

What happens if an institution fails to report a serial dud cheque issuer?

The institution faces penalties for concealment (B) Signup and view all the answers

Which of the following is a requirement under the regulations regarding the pricing of goods and services in Nigeria?

Goods must be priced in Naira only (C) Signup and view all the answers

Which official body is responsible for receiving reports of unethical conduct from bank employees?

Central Bank of Nigeria (C) Signup and view all the answers

What conditions must be met for the Federal Government or the Bank to avoid being subject to claims or demands?

They must act in good faith. (C) Signup and view all the answers

Which court has exclusive jurisdiction over offences under the Act?

The Federal High Court (A) Signup and view all the answers

What happens to deposit liabilities if a bank goes into liquidation?

They have priority over all other bank liabilities. (C) Signup and view all the answers

What role does the Governor have concerning corporate governance in banks?

The Governor can issue guidelines on corporate governance. (D) Signup and view all the answers

What should happen to unclaimed funds in a bank account after one year?

Withdrawals require the approval of two authorized signatories. (C) Signup and view all the answers

Under what circumstance does the Act prevail over other applicable laws?

When the provisions conflict with the Act. (A) Signup and view all the answers

What authority does the Bank have regarding the operations of agents of banks?

The Bank may regulate the operations of agents. (C) Signup and view all the answers

What is a key function of the Bank concerning systemically important banks?

The Bank may designate any bank as systemically important. (D) Signup and view all the answers

Study Notes

Banking Regulation and Supervision

Access Bank SBE Trainee Manual, October 2023
Banking regulation in Nigeria is defined as the laws created by the federal legislature, (National Assembly), and supporting legislation, including regulations, guidelines, and directives from regulatory authorities like the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC).
Banking regulation in Nigeria has distinct periods:
- Era of Free Banking (1892-1952): Had no controls or regulations, resulting in bank failures and losses to depositors.
- Era of Regulation (1952 to present): Marked by the introduction of licensing, minimum capital requirements, and institutional powers given to the CBN in 1952 and 1958, respectively. Also important was the institutionalizing of a regulatory and supervisory framework in the Banking Act (1968).
- Era of Indigenization and Nationalization (1972-1976): Nigerian Enterprises Promotion Act (Decree) of 1972 encouraged Nigerian participation in the banking sector.
- Era of Liberalization (1984-1992): Removed stringent regulations, introduced deposit protection scheme in 1988, and saw an increase in the number of licensed banks.
- Era of Bank Consolidation (2004-2009): Included increased minimum capitalization requirements.
Important regulators in the Nigerian Banking Industry include:
- Central Bank of Nigeria (CBN): The apex institution responsible for supervising the Nigerian financial system and has objectives including ensuring monetary and price stability, issuing legal tender currency, maintaining external reserves, and promoting a sound financial system.
- Nigeria Deposit Insurance Corporation (NDIC): Insures customers' deposits and implements orderly and efficient liquidation of failed banks.
- Federal Ministry of Finance (FMF): Handles fiscal policies (financial matters including tax revenue) of the Federal Government.
- Securities and Exchange Commission (SEC): Registers securities, exchanges, and OTC transactions.
- Economic and Financial Crimes Commission (EFCC): Investigates and enforces economic and financial crimes laws.
- National Drug Law Enforcement Agency (NDLEA): Identifies and locates narcotic drugs and psychotropic substances.
Direct Regulators
Indirect Regulators
Basel Committee on Banking Supervision
Basel Accords
Significance of Banking regulations
- Prevents systemic crises ensuring stability & public trust
- Prevents financial crimes and money laundering
- Ensures bank liquidity and capital sufficient to meet obligations
- protects consumers from mismanagement
- Implements robust risk management
- Controls interest rates for lower borrowing costs
Major legislations regulating banking in Nigeria: Banks and Other Financial Institutions Act (BOFIA)
Banking Regulation and Supervision in Nigeria has a detailed structure with many regulatory bodies that support governance and stability in the financial system.

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Description

This quiz explores the regulations governing banking in Nigeria, ranging from the free banking era to the present regulatory framework established by the Central Bank of Nigeria. It covers key historical periods and significant legislation that shaped the industry. Test your understanding of these concepts and their implications for banking practices.