Podcast
Questions and Answers
What was the main reason for the failure of many banks during the "Era of Free Banking" in Nigeria?
What was the main reason for the failure of many banks during the "Era of Free Banking" in Nigeria?
- Absence of regulatory oversight and protection for depositors (correct)
- Lack of competition in the banking sector
- Excessive government intervention in the banking industry
- Inflation and economic instability
Which of the following acts was the first to introduce licensing and minimum paid-up capital requirements for banks in Nigeria?
Which of the following acts was the first to introduce licensing and minimum paid-up capital requirements for banks in Nigeria?
- The Banking Ordinance (1952) (correct)
- The CBN Act (1991)
- The Central Bank of Nigeria Act (1958)
- The Banking Act (1968)
What was the primary objective of the Central Bank of Nigeria Act (1958)?
What was the primary objective of the Central Bank of Nigeria Act (1958)?
- To manage government finances and public debt
- To issue legal tender currency and promote a sound financial system (correct)
- To provide loans to small and medium enterprises
- To regulate the stock market and other financial institutions
Which of the following Acts represented the first comprehensive attempt to institutionalize a regulatory and supervisory framework for the Nigerian banking system?
Which of the following Acts represented the first comprehensive attempt to institutionalize a regulatory and supervisory framework for the Nigerian banking system?
What was the primary purpose of the two major amendments to the CBN Act in 1991 and 2007?
What was the primary purpose of the two major amendments to the CBN Act in 1991 and 2007?
Which regulatory agency, besides the CBN, is mentioned in the text as having authority to create subsidiary legislation?
Which regulatory agency, besides the CBN, is mentioned in the text as having authority to create subsidiary legislation?
What is the role of banking regulation in Nigeria?
What is the role of banking regulation in Nigeria?
Which of the following is NOT specifically mentioned in the text as a type of subsidiary legislation?
Which of the following is NOT specifically mentioned in the text as a type of subsidiary legislation?
What is the maximum allowed amount of foreign currency borrowing for banks in Nigeria, according to the CBN regulations?
What is the maximum allowed amount of foreign currency borrowing for banks in Nigeria, according to the CBN regulations?
What is the primary aim of the CBN's policy on currency substitution and dollarization?
What is the primary aim of the CBN's policy on currency substitution and dollarization?
According to the CBN regulations, what happens to a bank that fails to report a serial issuer of dud cheques?
According to the CBN regulations, what happens to a bank that fails to report a serial issuer of dud cheques?
Which of the following is NOT a key objective of bank supervision in Nigeria?
Which of the following is NOT a key objective of bank supervision in Nigeria?
What is the primary objective of Know Your Customer (KYC) regulations implemented by the CBN?
What is the primary objective of Know Your Customer (KYC) regulations implemented by the CBN?
What is the primary purpose of the Bank Verification Number (BVN) in Nigeria?
What is the primary purpose of the Bank Verification Number (BVN) in Nigeria?
Which of the following is an example of a supervisory tool used by the CBN to enhance consumer protection?
Which of the following is an example of a supervisory tool used by the CBN to enhance consumer protection?
What action is taken against customers who repeatedly issue dud cheques in Nigeria?
What action is taken against customers who repeatedly issue dud cheques in Nigeria?
Which of the following is NOT a consequence for a bank that fails to report a serial issuer of dud cheques to the CBN?
Which of the following is NOT a consequence for a bank that fails to report a serial issuer of dud cheques to the CBN?
What is the primary focus of the 'Macro-Prudential' approach to bank supervision?
What is the primary focus of the 'Macro-Prudential' approach to bank supervision?
What is the purpose of reporting unethical conduct or whistle-blowing within the CBN?
What is the purpose of reporting unethical conduct or whistle-blowing within the CBN?
Which of the following is a key difference between on-site and off-site bank supervision?
Which of the following is a key difference between on-site and off-site bank supervision?
Which of the following initiatives is aimed specifically at promoting financial inclusion in Nigeria?
Which of the following initiatives is aimed specifically at promoting financial inclusion in Nigeria?
What are the potential consequences for a bank that allows a customer to repeatedly issue dud cheques?
What are the potential consequences for a bank that allows a customer to repeatedly issue dud cheques?
Why is it important for regulators to rely more on off-site supervision in countries with limited resources?
Why is it important for regulators to rely more on off-site supervision in countries with limited resources?
What is the main reason why banks are considered inherently risky as financial intermediaries?
What is the main reason why banks are considered inherently risky as financial intermediaries?
Which of the following is NOT a component of bank examination as a supervisory tool used by Regulatory Authorities?
Which of the following is NOT a component of bank examination as a supervisory tool used by Regulatory Authorities?
What is the primary focus of the Routine Risk Assessment Examination?
What is the primary focus of the Routine Risk Assessment Examination?
What is the main goal of Macroprudential Supervision?
What is the main goal of Macroprudential Supervision?
Which of the following statements is TRUE about Risk-Based Supervision (RBS)?
Which of the following statements is TRUE about Risk-Based Supervision (RBS)?
What is the main difference between Routine Risk Assessment Examination and Risk-Based Supervision?
What is the main difference between Routine Risk Assessment Examination and Risk-Based Supervision?
Which regulatory bodies in Nigeria are responsible for conducting bank examinations?
Which regulatory bodies in Nigeria are responsible for conducting bank examinations?
What is the purpose of determining provisioning requirements for non-performing loans during the Routine Risk Assessment Examination?
What is the purpose of determining provisioning requirements for non-performing loans during the Routine Risk Assessment Examination?
Which of the following best describes the relationship between Macroprudential and Microprudential Supervision?
Which of the following best describes the relationship between Macroprudential and Microprudential Supervision?
Which of the following is NOT a primary objective of the Central Bank of Nigeria (CBN)?
Which of the following is NOT a primary objective of the Central Bank of Nigeria (CBN)?
What is the primary role of the Central Bank of Nigeria (CBN) in the Nigerian financial system?
What is the primary role of the Central Bank of Nigeria (CBN) in the Nigerian financial system?
Which of the following is a primary responsibility of the CBN in relation to the Nigerian currency?
Which of the following is a primary responsibility of the CBN in relation to the Nigerian currency?
What regulatory framework does the CBN utilize for sustainable risk management practices in the Nigerian banking industry?
What regulatory framework does the CBN utilize for sustainable risk management practices in the Nigerian banking industry?
Which of the following is NOT a direct objective of the CBN's role in the Nigerian financial system?
Which of the following is NOT a direct objective of the CBN's role in the Nigerian financial system?
What is the significance of the CBN's role in maintaining stability in the foreign exchange market?
What is the significance of the CBN's role in maintaining stability in the foreign exchange market?
How does the CBN contribute to promoting a sound financial system in Nigeria?
How does the CBN contribute to promoting a sound financial system in Nigeria?
Which of the following is true regarding the CBN's ability to redenominate currency notes and coins?
Which of the following is true regarding the CBN's ability to redenominate currency notes and coins?
What is the primary function of management in a bank?
What is the primary function of management in a bank?
What is the relationship between assets and liabilities in a bank?
What is the relationship between assets and liabilities in a bank?
What is the definition of liquidity in the context of banking?
What is the definition of liquidity in the context of banking?
What are the three main roles of bank supervisors?
What are the three main roles of bank supervisors?
Which of the following is NOT a market risk that banks face?
Which of the following is NOT a market risk that banks face?
How does the productivity of assets affect a bank's financial performance?
How does the productivity of assets affect a bank's financial performance?
What does the term "insolvency" mean in the context of banking?
What does the term "insolvency" mean in the context of banking?
What is the significance of good earnings for a bank?
What is the significance of good earnings for a bank?
Flashcards
Money Laundering
Money Laundering
The process of concealing the origins of illegally obtained money.
Central Bank of Nigeria
Central Bank of Nigeria
The apex institution managing Nigeria's financial system, established in 1958.
Liquidity
Liquidity
The availability of liquid assets to a bank to meet its obligations.
Risk Management
Risk Management
The process of identifying, assessing, and controlling threats to an organization.
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Basel Accords
Basel Accords
International banking regulations set to ensure banks maintain adequate capital.
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Exchange Rate
Exchange Rate
The value of one currency in relation to another.
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Monetary Policy
Monetary Policy
Actions by a central bank to manage money supply and interest rates.
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Consumer Protection
Consumer Protection
Laws and policies to ensure fairness and safety for consumers in financial transactions.
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Banking Regulation
Banking Regulation
Laws made by Nigeria's legislature and guidelines by regulatory authorities to oversee banks.
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Central Bank of Nigeria (CBN)
Central Bank of Nigeria (CBN)
The primary regulatory body for banking in Nigeria, established to ensure financial stability.
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Banking Ordinance of 1952
Banking Ordinance of 1952
The first significant legislation to introduce banking regulation in Nigeria, establishing licensing requirements.
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Era of Free Banking
Era of Free Banking
Period from 1894 to 1952 without regulation, leading to bank failures and depositor losses.
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CBN Act of 1958
CBN Act of 1958
Legislation that created the CBN, granting it powers to oversee and stabilize the banking sector.
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Banking Act of 1968
Banking Act of 1968
Codified rules and regulations for banking operations in Nigeria, institutionalizing a supervisory framework.
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Deposit Insurance Corporation
Deposit Insurance Corporation
Organization that protects depositors by insuring deposits in banks, minimizing risk.
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Minimum Paid Up Capital Requirement
Minimum Paid Up Capital Requirement
Regulation that mandates banks to have a certain amount of capital before they can operate.
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Currency Substitution
Currency Substitution
The practice of using a foreign currency in place of the local currency.
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Dollarisation
Dollarisation
The process of a country adopting the dollar as its official currency.
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Ethics & Anti-Corruption Office
Ethics & Anti-Corruption Office
A body within the CBN overseeing integrity and ethical practices.
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Foreign Exchange Risks Regulation
Foreign Exchange Risks Regulation
Guidelines on managing foreign currency borrowing in banks.
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Dud Cheques Measures
Dud Cheques Measures
Regulations to combat the issuance of dud cheques in Nigeria.
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Know Your Customer (KYC)
Know Your Customer (KYC)
Regulations requiring banks to verify customer identities.
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Credit Risk Management System (CRMS)
Credit Risk Management System (CRMS)
System to track and manage credit risks of individuals and banks.
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Dishonoured Cheques Act
Dishonoured Cheques Act
Law aimed at handling and managing dishonoured cheques.
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Bank Verification Number (BVN)
Bank Verification Number (BVN)
A unique identifier for each bank customer in Nigeria used for identity verification.
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Financial Inclusion
Financial Inclusion
Efforts by the CBN to make financial services accessible to everyone, particularly the unbanked.
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On-Site Examination
On-Site Examination
Evaluation performed directly at a bank's premises to verify reports and solvency.
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Off-Site Supervision
Off-Site Supervision
Analysis of mandatory returns from banks conducted away from their premises by regulators.
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Bank Examination Purpose
Bank Examination Purpose
To ensure banks are solvent and comply with laws, reducing the risk of collapse.
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Basel Committee
Basel Committee
A group that develops international banking regulations to enhance financial stability.
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Systemic Risk
Systemic Risk
The risk of collapse in the financial system due to the interconnectedness of institutions.
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Order of Liquidity
Order of Liquidity
Arrangement of assets on a balance sheet based on their convertibility to cash.
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Assets vs. Liabilities
Assets vs. Liabilities
Assets generate income while liabilities represent obligations or costs for the bank.
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Insolvency
Insolvency
A state where total realized assets are insufficient to cover liabilities.
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Management's Role
Management's Role
Management generates liabilities and invests in assets to ensure bank profitability.
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Income Maximization
Income Maximization
The process of increasing profits by managing asset productivity effectively.
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Liquidity Concepts
Liquidity Concepts
A bank's ability to meet obligations without selling assets at a loss.
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Market Sensitivity
Market Sensitivity
Measurement of how sensitive a bank's assets and liabilities are to market risks.
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Supervisors' Roles
Supervisors' Roles
Preventive, curative, and liquidation roles to ensure banking safety and efficiency.
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Bank Examination
Bank Examination
A tool used by regulators to assess bank safety and soundness.
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Risk-Based Supervision (RBS)
Risk-Based Supervision (RBS)
A process to identify and evaluate risks in banking activities.
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Macroprudential Supervision
Macroprudential Supervision
Supervision that addresses systemic risks to the financial system.
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Routine On-site Examination
Routine On-site Examination
Regular examination of banks conducted twice a year.
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Asset Quality Examination
Asset Quality Examination
Reviews bank assets for impairments at financial year-end.
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Provisioning Requirements
Provisioning Requirements
Calculations for non-performing loans and potential losses.
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Financial Conditions Assessment
Financial Conditions Assessment
Evaluating a bank’s financial state for safety.
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Compliance with Banking Rules
Compliance with Banking Rules
Adhering to regulations that govern banking operations.
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Access Bank SBE Trainee Manual, October 2023 - Banking Regulation and Supervision
- This manual details banking regulation and supervision in Nigeria.
- Banking regulation encompasses federal laws, subsidiary regulations, guidelines, and directives from authorities like the CBN and NDIC.
- Banking regulation in Nigeria has evolved through distinct eras:
- Era of Free Banking (1894-1952): No regulation, free entry/exit, and frequent bank failures.
- Era of Regulation (1952-present): Introduction of licensing and capital requirements, the CBN Act (1958), the Banking Act (1968), and the era of indigenisation and nationalisation (1972-1976) which involved Nigerian participation in foreign banks.
- Era of Liberalisation (1984-1992): Removal of stringent rules, the establishment of deposit protection schemes, and increased bank numbers.
- Era of Bank Consolidation (2004-2009): Increased minimum capital requirements reducing the number of banks.
- Banking regulation is crucial to prevent systemic financial crises, safeguard depositor funds, and deter financial crime.
- Regulatory bodies include:
- Central Bank of Nigeria (CBN): Apex regulatory body, overseeing banking supervision and regulation in Nigeria.
- Nigeria Deposit Insurance Corporation (NDIC): Insures customer deposits and manages bank failure situations.
- Federal Ministry of Finance (FMF): Oversees fiscal policies (financial matters), including tax revenue, and sometimes involved in bank supervision.
- Securities and Exchange Commission (SEC): Regulates the Nigerian capital market.
- Economic and Financial Crimes Commission (EFCC): Investigates and enforces laws against financial crimes.
- National Drug Law Enforcement Agency (NDLEA): A regulatory body tasked with identifying and locating narcotic drugs, proceeds and related items pertaining to financial crimes.
- The Basel Committee on Banking Supervision (Basel Committee) provides international standards for banking supervision like the Basel Accords (Basel I, Basel II, Basel III) focusing on capital adequacy and risk management.
- The core principles for effective banking supervision include a legal and institutional framework for public policy, regulatory requirements, a supervisory structure, and safety net arrangements.
- Recent initiatives outlined by the manual include a variety of prudential guidelines for banks, new regulations focusing on financial stability and consumer protection.
- BOFIA, the Banks and Other Financial Institutions Act, is the primary legislation governing bank supervision and regulation in Nigeria.
Highlights from BOFIA
- Functions of the Central Bank of Nigeria.
- Banking Business specifics.
- Opening and closing of bank branches.
- Minimum capital requirements for banks.
- Revocation of banking licenses.
- Capital Adequacy Ratios (CAR).
- Issues of liquidity, risk management, and loan loss provisions.
- Protection against adverse claims.
- Prioritizing deposit liabilities in times of liquidation.
- Governance regulations for banks (including directors, staff, assets).
- Penalties for non-compliance.
- Procedures for resolving banking crises.
- Establishing the Banking Sector Resolution Fund.
- Designation of systemically important banks.
- Bank agent regulations.
- Reporting unethical conduct, anti-corruption, and whistle-blowing.
- Regulations related to false returns, foreign exchange malpractice, and prohibited borrowing.
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