Silicon Valley Bank: NDIC tasks regulators on risk management

The Nigeria Deposit Insurance Corporation (NDIC) has urged regulators in the banking industry to draw supervisory lessons from the failure of Silicon Valley Bank and Credit Suisse by ensuring proper risk management.

The Executive Director (Operations), NDIC, Mr Mustapha Ibrahim gave the advice at the Chartered Institute of Bankers of Nigeria (CIBN) advocacy dialogue series 7.0, held physically and virtually, on Thursday in Lagos.

The discussions were under the theme: ‘Failure of Silicon Valley Bank in USA: Global Impact and Lessons for the Nigerian Financial System.’

The CIBN Advocacy Dialogue Series is a thought-leading programme created to empower various stakeholders with knowledge on emerging issues affecting the banking industry and the economy.

The series typically features subject matter experts and operators with the aim to generate ideas that can help individuals and organisations make better and informed decisions amid challenges in matters relating to banking, finance, and the economy, at large.

Giving illustrations from the insights provided by Clive Briualt, Chairman of the Toronto Centre, Ibrahim drew up 10 lessons that financial supervisors in Nigeria should leverage.

According to him, there is a need for financial sector managers and regulators to, first and foremost, understand the business that they are involved in.

He explained that knowing the nature of the business would help in structuring and regulatory approach as well as aid supervisors’ understanding of the business on both sides of the balance sheet — liabilities and asset sides.

Ibrahim urged supervisors to bear in mind the dangers involved in rapid growth expansion and treat it as a warning sign of higher risk.

He called on supervisors to understand the nature of deposit risks.

“It is not just enough to mobilise deposits but there is a need to know the behavioural pattern and nature of the depositors,” Ibrahim said.

“Additionally, policymakers and regulators are sifting through the rubble to consider what steps must be taken to prevent a similar crisis from occurring again.

“It is important to state that this event, of course, happened in the United States, however, because the world is inextricably linked by globalisation, could greatly destabilise markets and economies around the globe.

“So, it is pertinent to discuss the global impacts to extract insights to strengthen the banking system and ways to further improve the operational efficiency of Nigerian banks, in particular,” Opara said.