Financial Institutions Regulation
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Questions and Answers

What year was the National Insurance Commission established?

  • 1992
  • 1990
  • 1987
  • 1997 (correct)

    • Which body took over the supervision of insurance in Nigeria before the National Insurance Commission?

  • Federal Ministry of Finance
  • National Insurance Supervisory Board (correct)
  • Central Bank of Nigeria
  • Insurance Premium Bureau

    • What is one of the functions of the National Insurance Commission?

  • Connecting insurance companies with foreign investors
  • Supervising government insurance schemes
  • Issuing loans to insurance companies
  • Setting standards for the conduct of insurance business (correct)

    • Which institution collaborates with the National Insurance Commission?

    <p>Central Bank of Nigeria</p> Signup and view all the answers

    When was the Federal Mortgage Bank of Nigeria established?

    <p>1997</p> Signup and view all the answers

    What is a major issue that the Federal Mortgage Bank of Nigeria aims to tackle?

    <p>Housing problems</p> Signup and view all the answers

    What major problem is currently affecting the insurance industry as mentioned?

    <p>Distress syndrome</p> Signup and view all the answers

    Which of the following is NOT a function of the Nigerian Insurance Commission?

    <p>Regulation of stock market</p> Signup and view all the answers

    What is one of the primary functions of the NDIC?

    <p>To provide deposit insurance for banks</p> Signup and view all the answers

    Which ministry advises the government on monetary and fiscal operations?

    <p>Federal Ministry of Finance</p> Signup and view all the answers

    What regulatory body replaced the Capital Issues Commission in Nigeria?

    <p>Securities and Exchange Commission</p> Signup and view all the answers

    Which of the following functions is NOT performed by the NDIC?

    <p>Preparation of the Federal Government Budget</p> Signup and view all the answers

    Which body is responsible for licensing bureau de change in Nigeria?

    <p>Federal Ministry of Finance</p> Signup and view all the answers

    What year was the Securities and Exchange Commission established?

    <p>1979</p> Signup and view all the answers

    Which body was primarily responsible for licensing banks before 1991?

    <p>Federal Ministry of Finance</p> Signup and view all the answers

    Which of the following is a function of the Securities and Exchange Commission?

    <p>Promotion of orderly capital market</p> Signup and view all the answers

    What is one of the primary roles of a Central Bank in the financial system?

    <p>To supervise and control the activities of Microfinance Banks.</p> Signup and view all the answers

    Which financial institutions are controlled by the Central Bank?

    <p>Commercial Banks, Merchant Banks, Development Banks, and Insurance Companies.</p> Signup and view all the answers

    What is a likely outcome of effective regulatory measures in financial institutions?

    <p>Earlier warnings about potential problems.</p> Signup and view all the answers

    What is the principal function of the Central Bank of Nigeria?

    <p>To regulate and supervise financial institutions</p> Signup and view all the answers

    What is the essence of controls in financial institutions?

    <p>To promote efficiency and effectiveness.</p> Signup and view all the answers

    How does the Central Bank aid the government regarding monetary policies?

    <p>It advises on and implements monetary policies.</p> Signup and view all the answers

    Which of the following is NOT a method used by the Central Bank of Nigeria to control credit in the economy?

    <p>Direct Lending to Customers</p> Signup and view all the answers

    What is one of the responsibilities of the Nigerian Deposit Insurance Corporation (NDIC)?

    <p>To ensure the safety of depositors' funds.</p> Signup and view all the answers

    What does the Nigerian Deposit Insurance Corporation primarily complement?

    <p>The regulation and supervision of banks by the Central Bank</p> Signup and view all the answers

    Which of the following is a responsibility of the Central Bank of Nigeria?

    <p>Conducting foreign exchange monitoring</p> Signup and view all the answers

    What is a role of the Federal Ministry of Finance in the financial system?

    <p>To advise on and implement financial policies.</p> Signup and view all the answers

    Which one of the following is not a key function of the NDIC?

    <p>Licensing banks</p> Signup and view all the answers

    Why are various institutions created by the Government within the Nigerian Financial System?

    <p>To ensure good standards are maintained by operators.</p> Signup and view all the answers

    What role does the Central Bank of Nigeria play as a lender of last resort?

    <p>Offering funding to banks during financial difficulties</p> Signup and view all the answers

    Which of these is a tool used by the Central Bank of Nigeria to ensure monetary policy effectiveness?

    <p>Cash Reserve Requirement</p> Signup and view all the answers

    What is the primary goal of the Central Bank of Nigeria?

    <p>To promote a sound financial structure</p> Signup and view all the answers

    What was the original institution that the new body took over?

    <p>Nigerian Building Society</p> Signup and view all the answers

    What significant role did the regulatory and supervisory aspect of the institution gain prominence?

    <p>1991</p> Signup and view all the answers

    What decree gave the Federal Mortgage Bank of Nigeria more powers?

    <p>Decree No. 3 of 1991</p> Signup and view all the answers

    Which function was transferred to the new institution known as Federal Mortgage Finance Limited?

    <p>Finance functions</p> Signup and view all the answers

    What is one of the key functions of the Federal Mortgage Bank of Nigeria?

    <p>Managing the National Housing Fund</p> Signup and view all the answers

    Who collaborates with the Federal Mortgage Bank of Nigeria in its supervisory roles?

    <p>Central Bank of Nigeria</p> Signup and view all the answers

    What is one of the functions of the Board of the Federal Mortgage Bank of Nigeria?

    <p>Processing applications for Microfinance Banks</p> Signup and view all the answers

    When was the National Housing Policy adopted by the government?

    <p>1990</p> Signup and view all the answers

    Study Notes

    Introduction

    • Regulatory institutions are established by the Federal Government to maintain standards and ensure a well-functioning financial system.
    • These institutions oversee the activities of operators within the financial system to prevent excesses.

    Central Bank of Nigeria (CBN)

    • CBN acts as the principal regulator and supervisor of Nigerian financial institutions, standing at the apex of the banking system.
    • Responsible for licensing, supervising banks, and controlling credit through:
      • Open Market Operations
      • The Bank Rate
      • Moral Suasion
      • Special Directives
    • Promotes a sound financial structure and provides services such as:
      • Bankers’ Clearance
      • Examination of banks
      • Foreign Exchange Monitoring
      • Prudential Guidelines
      • Lender of Last Resort functions
      • Reserve Requirements and Cash Reserve Requirement
      • Interest Rate Policy and Capital Funds Adequacy

    Nigerian Deposit Insurance Corporation (NDIC)

    • Established by Decree No. 27 in June 1988 to complement CBN's efforts.
    • Functions include:
      • Providing deposit insurance for banks
      • Examining books and affairs of insured banks
      • Identifying and restructuring distressed banks
      • Resolving issues affecting the financial system
    • Collaborates closely with the CBN to ensure the health of banking operations.

    Federal Ministry of Finance

    • Acts as the government's agent in the financial system with responsibilities like:
      • Advising on monetary and fiscal operations in consultation with CBN.
      • Preparing the Federal Government Budget.
      • Licensing bureau de change; previously licensed banks until 1991, when CBN took over.
      • Executing financial directives from the Presidency.

    Securities and Exchange Commission (SEC)

    • Established in 1979 to regulate capital market operations, succeeding the Capital Issues Commission.
    • Key functions include:
      • Promoting an orderly and active capital market
      • Determining timing and amount of privately offered securities
      • Registering and supervising stock exchanges and related bodies
      • Approving companies for capital market listing
      • Regulating mergers and acquisitions per the Companies and Allied Matters Decree of 1990
      • Issuing guidelines on foreign investments and maintaining market surveillance.

    National Insurance Commission (NIC)

    • Established in 1997 to supervise insurance business in Nigeria, taking over from the National Insurance Supervisory Board.
    • Functions include:
      • Regulating insurance business standards
      • Establishing a bureau for public complaints against insurance companies
      • Approving insurance premium rates for various classes of insurance
      • Expected to help resolve distress in the insurance industry.

    Federal Mortgage Bank of Nigeria

    • Established by Decree No. 7 in 1997 to address housing issues in Nigeria.
    • Took over the functions of the Nigerian Building Society, aiming to act as the apex mortgage institution.
    • Functions include:
      • Licensing and supervising primary mortgage institutions
      • Managing the National Housing Fund
      • Advising other mortgage finance institutions
      • Conducting research to improve housing standards.

    Microfinance Banks

    • Functions include receiving and processing applications for establishing microfinance banks.
    • Supervise and control activities of microfinance banks and provide long-term financing.

    Conclusion

    • The Central Bank serves as the government’s representative in the financial system, closely associated with both the government and the financial sector.
    • Effective regulatory measures help in early identification of potential problems in financial institutions, aiding in prevention of failures.

    Summary

    • Comprehensive focus on the control of financial institutions is crucial for enhancing efficiency and effectiveness within the financial system.

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    Related Documents

    The Control of Financial Institutions PDF

    Description

    Explore the role of regulatory and supervisory authorities in maintaining standards within the financial system. This quiz covers the functions and significance of institutions, particularly the Central Bank, in overseeing financial operators' activities.

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