Why banks must contribute to AMCON sinking fund –Mark
Senate President David Mark yesterday emphasised the need for the establishment of a sinking fund to check banking crisis in the country in the future.
Speaking when he opened a public hearing on a bill seeking to amend the Assets Management Corporation of Nigeria (AMCON) Act 2010 organised by the Senate Committee on Banking, Insurance and Other Financial Institutions in Abuja yesterday, Mark said the fund if established would ensure that any future banking resolution costs, which may arise as a result of any financial mismanagement by the banks, would not be borne by taxpayers, but by the banks with money from the fund.
Senator Mark maintained that the fund when established would also among others ensure that commercial banks in the country are made to contribute annually an amount equivalent to 50 basis points of their respective total assets to the Resolution Cost Fund.
The Resolution Cost Fund is an agreement between the Central Bank of Nigeria and the commercial banks as proposed in Section 65 of the Asset Management Corporation of Nigeria Act, 2010 Amendment bill, 2014 presently before the National Assembly.
The fund seeks to meet the obligations of AMCON arising from debt securities issued in an event where the corporation is unable to meet up payments from proceeds generated through sale of acquired assets from banks.
Represented by Senate Leader Victor Ndoma-Egba, Senator Mark said: “Although AMCON believes that it is positioned to meet its obligations arising from the debt securities issued by it from its various sources of income, the Resolution Cost Fund will act as an additional safety net.”
While charging members of the committee to identify the main issues in the bill with a view to finding acceptable legislative frameworks, Senator Mark also called for wide-ranging consultations with various key institutions and stakeholders in the sector, including policy makers, other legislators and members of the public to enable for a clear vision on the AMCON bill.
For his part, chairman of the committee, Senator Bassey Otu (PDP, Cross River) revealed that the establishment of AMCON as a Special Purpose Vehicle was conceived as part of a policy option for executing the ongoing reforms in the banking industry by purchasing the nonperforming loans accumulated by the Deposit Money Banks in the country.
According to him, such policy option had a focus to “recapitalise the intervened banks through feeding up their balance sheet and providing liquidity to them to create new risk assets, as well as reduce their debt overhang and facilitate their ability to extend credit and lending to the real economy.”
He added that, “with the quarterly and annual reports available to this committee, AMCON has been delivering on its mandate. It has successfully prevented the widespread loss of jobs in the banking and allied industries, safeguarded the interest of depositors and creditors, checkmated an economic meltdown in the country and indeed supported several genuine businesses in the critical sector such as manufacturing, aviation, oil and gas.”