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Banks’ Year-End: CBN Shifts Deadline to Dec 2009
•Resident examiners to be posted to banks
From Kunle Aderinokun in Abuja, 07.24.2008

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The Central Bank of Nigeria (CBN) yesterday shifted the deadline for banks to adopt a uniform accounting year-end from December 2008 to December 2009.
Announcing the suspension at the end of the Financial System Surveillance Commit-tee (FSSC) meeting held yesterday in Abuja, CBN Governor, Professor Chukwuma Soludo, said the decision was in response to “irrational behaviour” of some banks in mobilising deposits and jacking up of interest rates, which could not be defended.
CBN’s soft-pedalling confirms THISDAY’s story of yesterday that the apex bank might review the December 31 deadline given to banks to adopt a uniform financial year-end.
Pointing out that the core (non-food) inflation rate stood at about 3.6 per cent, Soludo said the prevailing rates of both the deposit and lending rates in the market could not be justified.
For this, he said, the CBN would investigate the unwholesome practices by the banks.
According to him, the FSSC had decided “to postpone the requirement for the adoption of a uniform accounting year-end in the banking industry from December 2008 to December 2009. This is in response to the observed desperate behaviour of some banks in deposit mobilisation and hiking interest rates at levels that cannot be justified by the fundamentals. The CBN will investigate these practices by some banks.”
THISDAY had published a report of its investigations last Monday on how many banks were planning to adjust to the new financial year-end policy.
The newspaper reported that banks, especially those that have over-stated their financials over the years, were sending out their staff to mobilise deposits at month-watering interest rates, ranging between 16-20 per cent, depending on the value of the deposit.
This was with a proviso that such deposits should be fixed with the bank till December 31, when all banks were expected to comply with the uniform financial year policy.
Until the CBN compelled all banks and discount houses to adopt a uniform financial year, many banks, because of different accounting periods, usually went to the inter-bank market in order to boost their balance sheets.
As soon as the regulatory authorities finished verifying their financials, the funds were usually returned to the inter-bank market.
Currently, the average lending rate, which hovered between 13-16 per cent some three months ago, has nudged upwards to 23 per cent, minus fees and commission. If other costs are added, the lending rate could stretch to 29 or 30 per cent.
Mixed reactions, however, trailed the shift in the uniform financial year end yesterday. While the banks that have not burnt their fingers by taking deposits at exorbitant costs were jubilating, others that have taken position lamented that the CBN was inconsistent.
Commenting on the development, the Managing Director/CEO of one of the big banks, it was a very good development, which would bring down banks’ cost of funds and ultimately reduce the lending rate.
“This is very good development that would drive down lending rate and also have a fill-over effect on the capital market that has been starved of liquidity, which has moved to the money market where good return on investment is guaranteed.
“The Nigerian economy is not yet matured for banks to have a uniform financial year end. I just can imagine banks holding their Annual General Meetings at the same time. Besides, our auditors would not have the capacity to audit the banks at same period. Banks would also be saving a lot of money, which would have been paid for changing the accounting year. Ultimately, the banks, the shareholders and the borrowers are the beneficiaries of this policy shift,” he said.
A treasury of one of the banks that has taken position lamented that his bank would lose substantial money.
“It is really very sad that the CBN is shifting the goal post now. What happens to some of us that have taken deposits at a very high cost for 150 days? The CBN is just not consistent. They (CBN) asked us (banks) to seek board approval for a uniform financial year end, which we have secured. So, why shift the goal post,” he asked rhetorically.
Also yesterday, Soludo disclosed that the CBN would introduce resident examiners’ programme (REP) effective from January 2009 – confirming THISDAY’s report on the plan earlier in the year.
“In effect, from January 2009, the CBN will post staff to each of these banks who will monitor and supervise the activities of the banks on a daily basis and report to head office,” he said.
This, he explained, was to strengthen CBN’s effectiveness in the risk-based supervision, stating that “it is designed to enhance our hands-on knowledge of the banks’ operations, the complexity of their risk profile and to provide real-time and continuous evaluation of their operations”.
Similarly, the FSSC, Soludo said, reaffirmed to the general public that the CBN was still receiving and processing requests for banking licences.
“This is to correct the wrong impression that requests for banking licence are no longer being entertained by the CBN. The required conditions for banking licence are available on the CBN website and any investor that meets the conditions will be issued with a banking licence,” he said.