Amid Stronger Buffers, CBN Mandates Banks to Observe Sound Risk Controls - THISDAYLIVE

Central Bank of Nigeria (CBN), yesterday, said the banking industry – now with stronger balance sheets – must implement tighter risk management, sound governance, and responsible lending in the post-recapitalisation era.

CBN stated that bigger bank balance sheets alone will not guarantee resilience, which is key for stability.

CBN Deputy Governor, Corporate Services Department, Dr. Muhammad Sani Abdullahi, gave the charge in Abuja at the opening of the central bank’s 38th Annual Seminar for Finance Correspondents and Business Editors, with the theme, “Towards a Robust and Resilient Financial System in the Post-Banking Sector Recapitalisation Era.”

Abdullahi said CBN would continue to deepen its risk-based supervisory approach, macroprudential surveillance, and stress testing to safeguard the stability of the financial system.

CBN’s Director, Banking Supervision Department, Dr. Olubukola Akinwunmi, for his part, made it clear that in the post-recapitalisation era, banks must follow the rules. Akinwunmi said profit-chasing will not excuse cutting corners, as enforcement tightens to keep the financial system strong.He stressed that the regulator would insist on strict compliance with prudential requirements, adding that stronger capital buffers would be meaningless if banks continue to take excessive risks.

Still addressing the theme of the forum, Abdullahi said, “Our supervisory approach will continue to emphasise risk-based supervision, macroprudential surveillance and enhanced stress testing.”

He said financial sector coordination, consumer protection, fintech regulation, and support for responsible innovation would remain important, alongside crisis preparedness and resolution planning.

Abdullahi said, “As the governor has consistently emphasised, preserving monetary and financial stability requires continued vigilance.“We must remain forward-looking, data-driven and responsive to developments at home and abroad.”

The CBN deputy governor said the recent recapitalisation had provided the banking industry with stronger capital to support a growing economy, but stressed that capital alone would not guarantee resilience.

According to him, “Capital, however, is a starting point. Boards and management must maintain sound controls, recognise risks early and lend on the strength of viable projects.”

By the end of the two-year recapitalisation programme announced in March 2024, Abdullahi disclosed that 33 banks had met the revised minimum capital requirements and raised N4.65 trillion.

He said Nigeria’s ambition of building a $1 trillion economy by 2030 required banks capable of mobilising and allocating capital on a much larger scale.He stated, “Stronger capital buffers should enable banks to finance long-term infrastructure, support industrial expansion, facilitate international trade and compete more effectively in regional and global markets.

“They also provide greater capacity to absorb losses during economic stress and sustain investment in innovation and digital transformation.”Abdullahi stressed that the stronger capital base must be underpinned by sound corporate governance.

He explained, “Sound corporate governance must underpin that work. Boards and management teams must demonstrate integrity, accountability and transparency, strengthen internal controls and guard against excessive risk-taking.

“Their decisions must protect the interests of depositors, investors and other stakeholders.”

He said risk management must also extend beyond traditional credit risk as banks contend with a more complex operating environment.“Risk management must extend beyond credit risk to market, liquidity and operational risks, as well as cybersecurity, third-party dependencies and climate-related financial risks.”

Abdullahi added, “Banks need frameworks that identify these exposures early and allow management to respond before they threaten the institution’s resilience.”

According to him, CBN would continue to pay close attention to governance, asset quality, liquidity, and large exposures.

Abdullahi said, “We will also expect banks to protect customer data, maintain reliable payment services, and recover quickly from disruptions. A stronger balance sheet must be matched by stronger management of risk.”

He also stressed the importance of public trust as financial services became increasingly digital.

The CBN deputy governor said banks must continuously invest in cybersecurity, data protection, disaster recovery, and business continuity to ensure that customers could access their funds and transact securely.

“Innovation brings opportunities, but public trust depends on customers being able to transact securely and access their funds reliably, including when systems come under pressure,” he said.

Abdullahi said the benefits of recapitalisation should ultimately be assessed by its impact on the wider economy, not merely by the amount of capital raised by banks.

“The wider economy should see the benefit over time,” he said.

According to him, agriculture, manufacturing, services, and infrastructure need finance suited to their cash flows and investment horizons, while smaller firms and households require dependable payments, appropriate products, and fair treatment.

“We should assess recapitalisation by the quality of banking services and productive lending it supports, as well as by the amount of capital raised,” he said.He further stressed that the benefits of a stronger banking system must reach underserved segments of the economy.

“That benefit must reach rural communities, women and young entrepreneurs, as well as customers already served by the formal financial system,” he said.Abdullahi described consumer protection and financial inclusion as integral to financial system resilience.

He stated, “Consumer protection and financial inclusion are integral to resilience: a system that people can access, understand and trust is better able to support lasting growth.

“Stronger bank balance sheets should translate into wider access and better service.”

Abdullahi stated that the banking sector’s stronger capital base should position it to play a greater role in financing Nigeria’s economic transformation.He said the country’s $1 trillion economy ambition would require significantly greater mobilisation and allocation of capital, particularly towards infrastructure, industry, trade and other productive sectors.

He also stated that the environment in which banks operated was becoming increasingly interconnected, with geopolitical uncertainty, climate-related risks, cyber threats, and rapid technological change capable of transmitting shocks across financial, trade, and technology channels.

“Resilience therefore requires institutions to anticipate emerging risks, absorb shocks, adapt and recover,” he said.

Meanwhile, Akinwunmi, in his paper, titled, “Consolidating Reform and Recapitalisation Gains to Strengthen Financial System Resilience: Strategic Imperatives for Sustainable Growth (CBN Perspective),” said the successful recapitalisation of the banking sector should be regarded as a foundation rather than the destination of reform. That is as the focus now shifts to building resilience through stronger governance, risk management, asset quality, liquidity, and operational controls, he said.

He stated, “There will be no room, as might have been used in the past, to sidestep our rules and regulations for the sake of profitability.”According to him, capital adequacy alone cannot guarantee stability, as poor governance, weak underwriting, deteriorating asset quality, liquidity pressures, cyber threats and excessive risk-taking could quickly erode banks’ capital positions.

Akinwunmi said CBN was consequently moving towards more proactive and risk-sensitive supervision, including the implementation of risk-based capital requirements introduced in March 2026.

Under the framework, banks are required to maintain capital commensurate with their individual risk profiles and business models, rather than relying solely on uniform minimum capital thresholds.

Akinwunmi also highlighted the regulator’s withdrawal of pandemic-era regulatory forbearance. He said the measure was necessary during the period of severe economic stress, but it could no longer be allowed to obscure the true financial condition of banks.

He said the exit from forbearance was particularly timely because it coincided with the recapitalisation exercise, allowing banks to strengthen their balance sheets while recognising and addressing underlying risks.

The CBN director disclosed that enforcement of existing regulations had been significantly intensified, citing rules on insider credits, corporate governance and offshore investments.

He said banks could no longer expect regulatory accommodation for breaches that had previously been tolerated, adding that the regulator is determined to prevent risky practices from undermining the gains of recapitalisation.

Akinwunmi also pointed to CBN’s Structured Examination System, which enables supervisors to conduct and track examinations digitally, improving transparency, quality assurance, and data-driven supervision.

He said the post-recapitalisation phase was ultimately about ensuring that banks could withstand future shocks while continuing to provide essential financial services and support economic growth.

Akinwunmi stressed that the success of recapitalisation would, therefore, be measured not merely by the volume of capital raised, but by the resilience and sustainability of the banking system.

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