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Strengthening the Financial System Establishing an International Financial Centre

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In 1975 BAHRAIN promulgated regulations for the creation of Offshore Banking ... The first Director of the Bahrain Monetary Agency Alan Moore (formerly with ... – PowerPoint PPT presentation

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Title: Strengthening the Financial System Establishing an International Financial Centre


1
Strengthening the Financial System Establishing
an International Financial Centre
Anthony R P Williams, ACIB
2
Where are we now ?
  • The Banking Sector
  • Successful consolidation to produce 25 well
    capitalised banks.
  • BUT post-consolidation risk still a latent
    threat.
  • Greater competition, real banking,
  • New products, term lending, retail banking
  • Too much capital ? ROE - Goodwill in the
    balance sheet
  • Ratings international investors want to invest
    in Nigerian banks

3
Regulation
  • Risk Based supervision
  • Basel 2 adopted
  • FATF approved (at last !)
  • Are managements/CBN/NDIC up to the challenge ?
  • Role of EFCC ?
  • Global standards on Anti-money laundering and
    Financial crime
  • 419s

4
Insurance/Pensions
  • Reform of Insurance industry not yet successfully
    concluded
  • Pensions reform looking good
  • Pencom - PFCs and PFAs outside investment not
    yet permitted

5
Stock Market
  • Well regulated a guest of London Stock Exchange
    last week, showcasing Nigerian banks.
  • Custody Services Nigerian banks now offering
    custody services.

6
Foreign Exchange
  • Market maturing
  • Oil and Gas exports dominate CBN a prime
    mover.
  • Cash market Bureaux de change, Travelex etc
  • Diaspora remittances Western Union, Card
    offerings,
  • Cover for imports Nigeria is worlds major user
    of LCs
  • post shipment inspection UCP 600.

7
Nigerias status
  • New Government widely accepted worldwide in
    spite of poll irregularities.
  • Important role in regional peacekeeping
    Liberia, Sudan etc
  • Countrys natural resources particularly
    hydrocarbons - in demand (USA, China, India
    etc).
  • Huge market 140m people
  • Unrest in Niger Delta area an ongoing concern

8
The Way Ahead
  • Reforms to continue
  • Consolidate reforms GOVERNANCE
  • Are Directors (Banks, Insurance companies, etc)
    up to the job ?
  • Staff integrity, training professional
    workforce
  • Risks operational, credit, reputational etc
  • Financial Crime AML (EFCC)
  • Regulatory Compliance KYC,KYB the African
    way
  • CBN Supervision quality of examiners, A level
    playing field,
  • Communicate the objectives top down include
    ALL Nigerians
  • Co-ordinate actions all elements marching on
    the same path.
  • Tell the good news perception is more
    powerful than actuality

9
Control of the Economy
  • Allow the professionals to do their job
  • Inflation, money supply, exchange rate etc
  • Federal and State governments must know their
    place. Do not let them interfere in the private
    sector!
  • Punish Stealing of national wealth (Financial
    Responsibilities Act)
  • Accurate statistics needed to run a sound
    economy.
  • Allow the private sector to prosper every
    Nigerian is a potential entrepreneur.
  • Give Business a chance Corporates of all sizes
    must contribute.
  • They must also behave (File accounts on time, pay
    taxes etc)
  • Accountants Audits world standards ?
  • Legal framework - court process too long
    corrupt judiciary ?

10
Financial Products
  • Financial institutions competing at last !
  • Few foreign players (Indigenisation Decree)
    Citibank, Stanbic
  • Nigeria catching up ATMs, Credit/Debit cards,
  • Telephone/Internet banking,
  • Insurance products Life
  • Islamic Banking
  • New systems I/T, satellites etc, Security of
    staff and customers
  • Money market CDs, Interbank, Corporate/Governmen
    t debt
  • Forward FX. Hedging. Internationalise the naira.

11
Priorities
  • Financial Responsibility
  • State Governments
  • Annual Balance sheets and Budgets
  • monthly P L reports posted on the internet.
    These important entities can then begin to play
    their proper role in the financial life of the
    nation. Bond issues etc. No overseas borrowing
    without CBN approval !
  • Fiscal responsibility
  • if public are to pay taxes they must see what
    they are getting.
  • Hospitals, Roads, Schools
  • EDUCATION, EDUCATION, EDUCATION

12
Land Use Decree
  • This Decree - promulgated in 1978 - confers
    ownership of State land (in contrast to Federal
    or parastatal land) in the State Governor.
  • Not only has this Decree caused many social
    problems it continues to disrupt normal bank
    financings because the taking of land or property
    as security (a fundamental banking activity) is
    made more complex if not impossible.
  • Early repeal is recommended so that mortgage
    lending can be developed and the rural community
    in particular can prosper.
  • The efficiency of Land registration services,
    surveys and valuations will also require
    improvement.

13
Infrastructure/Security
  • Financial markets rely on secure, reliable
    communications
  • Telecommunications, roads, railways, air travel,
    sea transport.
  • Electricity supply.
  • Safe environment for the staff.
  • Reliable infrastructure water, sewage

14
Establishing an International Financial Centre
  • Why Nigeria ?
  • Whats the attraction ?
  • Special incentives
  • Huge potential resources, infrastructure
    projects

15
Which model ?
  • The idea is to entice the major global financial
    institutions to set up in Nigeria.
  • In 1975 BAHRAIN promulgated regulations for the
    creation of Offshore Banking Units (OBUS)
    modelled on those operating in Singapore.
  • OBUS are branches of international banks exempted
    from foreign-exchange controls, cash reserve
    requirements, no corporate or personal taxes etc
  • Minimum paid up capital of USD50m.
  • OBUs pay an annual licence fee (about USD26,000)
  • Prohibited from dealing with residents of Bahrain
    (except Government, its agencies or licenced
    commercial banks)
  • Cannot deal in Bahraini dinars can provide
    services to non-residents.

16
Bahrains success
  • Since 1975 over 50 OBUs have been established
    these are fully staffed operations not
    brass-plates.
  • Initially the Lebanese civil war caused an exodus
    of international banks to Bahrain. OBU numbers
    rose to over 75 in the early 1980s but declining
    oil revenues and the first Gulf War caused a
    number of international banks to withdraw.
  • Burgeoning oil revenues of its neighbours, the
    causeway to Saudi Arabia, the return of Arab
    capital to the region after 9/11, as well as
    Bahrains emergence as the premier Islamic
    banking centre have re-energised the countrys
    success.
  • An ambitious Financial Harbour project is being
    built on (more) reclaimed land in Manama (as is
    the World Financial Centre twin towers project).

17
Regulation
  • Bahrains success has been based on strict
    attention to good governance from the very
    beginning.
  • The first Director of the Bahrain Monetary Agency
    Alan Moore (formerly with Williams and Glyns
    and later Treasurer of Lloyds Bank) worked
    closely with the Bank of England. That
    relationship continues with the FSA.
  • His successor, Abdalla Saif, is now the Financial
    Adviser to the PM.
  • Bahrain operates a light-touch control regime
    for OBUs (which are branches of foreign banks)
    they are required to provide the Central Bank
    with monthly statistical information, quarterly
    prudential reports and annual audited financial
    statements.
  • Bahrain Law (decree of 2001) makes money
    laundering and assisting in money laundering an
    offence punishable with imprisonment.

18
Other Factors
  • Strategic location, midway between east and west
    time zones (permitting trading for a maximum
    number of hours open Sundays)
  • Excellent internal infrastructure and
    international air transport links (road to Saudi
    Arabia and a causeway to Qatar planned)
  • No Taxes. Sustained low rate of inflation
  • 100 foreign ownership of most types of business
    no restrictions on repatriation of capital,
    dividends or profits.
  • Sophisticated and reliable telecommunications
    network.
  • A well educated workforce 27years of OBU
    banking experience.
  • World class legal and accountancy framework
  • Modern, high standard of living cosmopolitan
    liberal family atmosphere. Good shopping.
    Entertainment
  • Low crime, secure environment.
  • Pleasant and healthy climate. Sports facilities
    golf, marina, etc

19
The people
  • Bahrainis, like Nigerians are amongst the most
    polite and friendly people in the world.
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