Despite the best efforts of the Central Bank of Nigeria (CBN), the financial industry is still strained by weak counterparty management policy due largely to lack of reliable data and dearth of powerful financial analysis tool that can enable financial institutions evaluate their customers and counterparties, Nigeria CommunicationsWeek can now report.
The result is that as the regulatory authority and risk managers of banks sketch out details of how to improve lending, they are still tied to the mystifyingly complex series of banking rules that produce vicious credit cycle.
People familiar with banking software and regulation said that Nigeria has not yet implemented global risk management standards, such as Basel II, which requires banks to maintain elaborate loss histories; data availability for deriving stress test impacts is limited.
Eager however to consolidate and achieve a robust banking industry through reforms, the CBN has hinted that it would engage specialists to drive the implementation of the Basel II and III, as well as other key initiatives aimed at enhancing effective banking supervision.
Basel III is a global regulatory standard on bank capital adequacy, stress testing and market liquidity risk agreed upon by the members of the Basel committee on banking supervision.
Hussaini Yakubu,, chief operating officer of Mayakorp Limited, a solutions and IT services provider, advised the CBN to begin with a business decision support tool that will come with solution for counterparty risk management, financial analysis and internal rating.
This is due to obvious loopholes in Basel II blamed as one of the major factors of the global financial crisis.
According to Hussaini Yakubu, because of the fragile nature of developing economies, regulatory authorities must ensure that successive banking capital rules do not make the same mistakes.
Nigeria CommunicationsWeek gathered that Basel II collapsed on all the three pillars it was founded under the weight of the crisis before the plaster had even set.
During the crisis, the global financial system came close to a complete halt as a result of problems propagated via financial markets to banks globally.
The need to underpin the liquidity problems of banks is imperative.
Sanusi Lamido Sanusi, CBN governor, recently told an audience at the London School of Economics that Basel III bank reforms currently in development probably won’t prevent banks taking on excessive risk because they are too soft at influencing behavior.
“I think one of the major problems that Basel III will have is that it falls into the…trap of thinking that by simply creating certain capital guidelines you can alter behavior,” he said.
His submission falls aptly in line with Hussein’s recommendation of flexible tool, easy to implement, even for complex projects for the industry before they progress to the full implementation of Basel III.
Hussaini said that ANADEFI Banks, a solution developed by O.R. System of France is just what Nigerian banks need to give them traceable and qualified information.
Nigeria CommunicationsWeek gathered that ANADEFI Banks is fully compliant with Basel II and III and combines external, internal, financial and non-financial data into a single repository for counterparty rating and gives a better understanding of risk origination.
It also standardizes financial analysis and counterparty rating practices within a centralized solution which is robust, flexible and scalable (multi industry, multi financial statements, etc.) and easily maintains rating models and reduces the time to market of the rating model validation to its implementation.
Elsewhere, ANADEFI Information Exchange Platform (AIEP) addresses Central Banks and regulators’ growing need to manage their counterparty risks and Basel II and III compliance requirements.
AIEP is modular software enabling Central Banks and regulators’ risks department to set up a unique repository where are stored all their third parties and risks information.
Two of O.R. System customers have already implemented it with success on some of their platforms, including the enterprises information trade company Société de Commercialisation d’Informations d’Entreprises (SCIE), an initiative of several financial institutions and banks in the West Africa.
Abel Assogba, of SCIE said: “Thanks to its flexibility and reliability the AIEP solution enables us to optimize our counterparty risks management. O.R. System was able to understand our strategic issues and accurately adapted the software to our need for a balance sheets and enterprise rating platform in the countries of our monetary zone. We are now going to extend the solution and use its other modules”
Fabrice Fauconnier, development director at O.R. System: “We know that some central banks have implemented a risks platform but many of them have not found yet an adequate tool for an information exchange platform; our software provides a complete and coherent turnkey solution in response to this strong need.”
ANADEFI Banks Ring Solution to Banking Crisis
