The International Monetary Fund (IMF) has advised Nigerian banks, and their counterparts across the world to restructure loans given to sectors that were badly hit by the Coronavirus (COVID-19) pandemic.<\/p>\n
In a report titled: \u2018Maintaining Banking System Safety amid the COVID-19 Crisis\u2019, the IMF Director of the Monetary and Capital Markets Department, Tobias Adrian, said the pressure on the banking system is growing and higher defaults on debt are imminent, insisting that a shock to the financial sector similar in magnitude to the 2008 crisis will occur.<\/p>\n
The Nigerian Bankers\u2019 Committee had last week, asked the Central Bank of Nigeria (CBN) to grant commercial regulatory forbearance to banks to restructure terms of loans in affected sectors. They also advised the regulator to strengthen Loan to Deposit Ratio (LDR) policy, promoting \u2018significant extra lending from banks\u2019.<\/p>\n
Adrian said: \u201cLike the health experts, bank supervisors are responding to a fast-moving and extraordinary situation. Supervisors must combine the tools from their playbooks for dealing with natural disasters, operational risk events, and bank stress episodes. With its global vantage point, and drawing from past experience, the IMF can offer some additional guidance on the way forward,\u201d he said.<\/p>\n
He advised regulators and supervisors to clearly communicate to banks to be proactive in rescheduling their loan portfolio for those borrowers and sectors that have been hard hit by the severe, but temporary, shock.<\/p>\n
\u201cThey should also remind banks about flexible credit risk management and the accounting standards for impairment in these situations. Accounting bodies have helpfully stepped in to clarify to auditors how such modifications should be viewed once the economy begins to recover,\u201d he said.<\/p>\n
He also asked banks not to hide their losses. \u201cBanks, investors, shareholders and even taxpayers have to bear the loses. Transparency helps prepare all stakeholders; surprises only worsen their response, as was proven during the 2008 crisis,\u201d he said.<\/p>\n
Tobias said economic upheaval facing the world today, has surpassed that witnessed during the global financial crisis, hence the need to help those hurt by it.<\/p>\n
The IMF insisted that it is ready to help rebuild distressed banks, including helping the lenders to recapilaise, where need arises. \u201cThe IMF has deep experience in helping countries rebuild distressed banking systems through its technical assistance programmes, and will stand ready to help,\u201d he said.<\/p>\n
\u201cThe coronavirus pandemic is a different kind of shock. Never before have modern economies shut down at the drop of a hat. From one week to the next, many workers lost their jobs and paychecks. Restaurants, hotels, and airplanes all emptied. And consumers and businesses now face steep losses in income\u2014and potentially widespread bankruptcies,\u201d he said.<\/p>\n
Tobias also advised on how banks and regulators should treat fiscal measures, including measures directly targeted at borrowers, credit guarantees, payment holidays, direct transfers and subsidies\u2014beyond any current guidance in the Basel capital framework\u2014would help with overall transparency.<\/p>\n
He also for continuous dialogue between supervisors and banks, especially in this unprecedented situation of working remotely with colleagues, customers, and supervisors.<\/p>\n
\u201cTypically, reporting requirements in key areas, such as liquidity and creditor positions, are enhanced in a crisis, but given operational disruptions, deferring other reporting requirements less material to assessments of financial health may make sense. Banking is a global business. Broad coordination among national regulators at the international level is imperative. This crisis will pass eventually, and the effects may take time to dissipate, but preserving the integrity of the international framework will be crucial for the credibility and integrity of the global financial system. International bodies like the Financial Stability Board and the Basel Committee on Banking Supervision are working night and day to do just this,\u201d he said.<\/p>\n
Tobias also asked banking sector regulator not to change the rules of their operations, insisting that doing so in the midst of a crisis will likely cause more confusion. \u201cLikewise, be prepared to give banks time to meet rules if they fall short, and hold off on implementing new initiatives\u2014banks should remain focused on maintaining ongoing operations, given the increased difficulties of conducting such operations remotely.,\u201d he advised.<\/p>\n","protected":false},"excerpt":{"rendered":"
The International Monetary Fund (IMF) has advised Nigerian banks, and their counterparts across the world to restructure loans given to sectors that were badly hit by the Coronavirus (COVID-19) pandemic. In a report titled: \u2018Maintaining Banking System Safety amid the COVID-19 Crisis\u2019, the IMF Director of the Monetary and Capital Markets Department, Tobias Adrian, said […]<\/p>\n","protected":false},"author":62,"featured_media":20877,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,15],"tags":[1108,566],"class_list":{"0":"post-23869","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","6":"hentry","7":"category-all-news","8":"category-economy","10":"tag-imf"},"yoast_head":"\n