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MFW4A/AACB organized a training program on: “Crisis Management and Banking Resolution” in Abuja

14.02.2017

The Central Bank of Nigeria (CBN) hosted the training workshop on “Crisis Management and Banking Resolution” in Abuja Nigeria, from 16 – 20 January

The workshop was organized with the technical support of the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) and is part of the activities of the Community of African Banking Supervisors (CABS), a joint initiative of Making Finance Work for Africa (MFW4A) and the Association of African Central Banks (AACB).

The workshop was designed to cover important aspects of crisis management and bank resolution. The recent global financial crisis provided several lessons to the policymakers. In particular it showed that the failure of banks, especially, large and complex cross-border banks could be costly, with an adverse effect on the financial sector and the real sector.

The Basel Committee on Banking Supervision (BCBS) initiated regulatory reforms to make banks more resilient. BCBS's guidelines on identifying and dealing with weak banks emphasize the importance of timely identification and prompt remedial action to address the underlying causes of a bank's problems. The weaker banks should be dealt with in manner where there is no regulatory or supervisory leniency.

Under Basel III, the level and quality of capital as well as the level of liquidity have been enhanced. The capital and liquidity buffers will make the banks more resilient and better prepared to handle any potential stresses. The Basel III framework further strengthens the microprudential as well as the macroprudential frameworks, which contribute significantly to building up resilient banks and promoting financial stability.

It is therefore essential for jurisdictions to implement an effective framework for Recovery and Resolution. The Recovery plans, drawn by banks themselves, make them better prepared to take action when there are idiosyncratic or systemic stress situations. Supervisory authorities assess recovery plans in order to identify any weaknesses and to suggest corrective action by banks.

This training contributed to the dissemination of international standards and implementation of global best practices in the context of Africa. The training was highly valued by participants, comprising of senior staff from banking supervision and financial stability departments from twenty-three (23) African central banks and banking supervisory agencies.

The first part focused on policies for enhancing the resilience of banks to minimize the possibility of the occurrence of a potential crisis. The sessions covered various topics, including: Post Crisis Reforms to Strengthen the Resilience of Banks; Basel III Framework's Capital Composition, Buffers and Leverage Ratio; and Macroprudential Policies: Tools and Frameworks.

The second part focused on policies and frameworks designed to minimize the impact of a crisis, with sessions on: Stress Testing, Recovery Plans and Early Intervention: How to deal with idiosyncratic and systemic stress?; Cross-border Banks: On-going Supervision, Recovery and Resolution; Resolution Regimes: FSB's Key Attributes, TLAC (Total Loss Absorbing Capacity) and EU's MREL (Minimum Requirement for own funds and Eligible Liabilities); and a Round-table on the country frameworks for dealing with weak banks, deposit insurance, crisis management and bank resolution.

The workshop was further supported by two case studies on: (i) Basel III, illustrating the interaction between Basel III capital, buffers and leverage ratio; and (ii) Cross border bank supervision.

Finally, the workshop also provided an opportunity for consultation on the 2017-2019 CABS work programme. Participants called on MFW4A and AACB to pursue their collaboration.

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About the Community of African Banking Supervisors

The Community of African Banking Supervisors (CABS) was established to contribute to ongoing efforts of strengthening banking regulatory and supervisory frameworks on the continent. Its membership consists of representatives/staff of African central banks and/or banking supervisory authorities.