The banking sector is grappling with series of challenges that include rising customer complaints over excess charges and skills-gap among the workforce. In this interview with COLLINS NWEZE, President/Chairman of Council, Chartered Institute of Bankers of Nigeria (CIBN) Dr. Uche Olowu speaks on non-performing loans, disruption in the banking sector by Financial Technology (FinTech) firms.
The average Nigerian on the street believes the customers are losing money to banks because of excess and illegal charges, and insider-related fraud. How will you be handling this?
First and foremost, you have to realise that there is a Bankers’ Committee Sub-Committee on Ethics is in the CIBN and they meet to look at customers’ complaints. It is headed by a sitting bank Managing Director from any bank. They sit and resolve issues. We have had cases of banks refunding, and cases of letting the customers know that there is no case against the bank and that is resolved amicably.
That is one, and on the ethical conduct, the CIBN has investigative panel, and when the panel finds someone guilty, the case goes to the Disciplinary Tribunal. We have had situations, where cases were taken to the Disciplinary Committee and the certifications and licences of erring members were withdrawn. Some were tried in the court, based on our recommendation.
So, that disciplinary mechanism is strong. We have to publicise it more, because that’s why you have signed the code of conduct that when you go against your ethical oath, and if you are found guilty, you will be disciplined properly.
What is your view on the rising complaints against bankers and insider-related loan abuse in the industry?
Let me speak on the complaints against bankers. What has happened is that over time, the eroding values in the society have affected every known profession. Banking is not an exception because the people who are employed in banking are products of the larger society.
So, what we want to do is to put up a process, so that when a bad egg comes in, he is always removed to ensure we have disciplined people. We are just thinking of ways of fine-tuning entry to the banking sector. You can only do what you can do; a bad person is a bad person. For someone, who ordinarily, has conceived in his heart to defraud a system, there is really nothing you can do.
Basically, what we can do is to strengthen our governance system, so that bad apple is easily identified and weeded out. Banking is honorable profession, we are honourable people, but in every profession, you have the bad ones. But you know, the bad eggs have bad odour that spreads fast. If I say we do not have the bad ones within us, I will be deceiving myself.
What is your view about sanctity of contract in Nigeria?
There are things we do not do in this country, if you enter into a contract, and perhaps things change, instead of going through the proper channel, you start saying you were over charged. But did you seek proper advice to guide you before you signed the contract?
Nobody forced you do that. But if you have a situation, whereby the banker is out to cheat, of course, the system is there to tackle that. Even the Central Bank should be commended for setting up the Consumer Protection Department. Provided the excess charge is within the contract, nothing can be done, but anything outside the contract should be refunded. Don’t lose the fact that banking is all about trust and confidence. We should not betray that confidence. We should do everything possible ensuring that people respect the sanctity of contract.
Various banks have put on their compliance procedure on their own. Even reviewing charges before their customers come complaining. Revenue Assurance Departments assure the quality of earnings that come into the banks. It is a dent on your own brand if continuously you are having dirt thrown on your system. We have seen banks review the quality of their earnings. There is no way you can rule out bad eggs in the system, but the assurance you will have is that the mechanisms of fishing out those things are there and we will continue to support that framework.
What advice do you have for bank customers?
I have advised people with bank accounts that these charges are not different from what you have in other countries. What has impacted on bank charges is the cost of doing business. It is very high. The banks practically, provide everything and there are no freebies. I do not agree or subscribe to charges that have not been agreed on upfront.
Please, when you are opening an account, it is clearly stated on the account opening forms, that there are no charges outside what the banks have agreed with you. There are banking tariffs but people are so lazy to look at the CBN website to see the approved tariffs. They are all there. There are ones that are negotiable, there ones that are sacrosanct fees. No responsible bank will want to go outside what was approved for the charges. But there could be occasional situations where that happen. That is why I made reference that we have to self-regulate ourselves, ensuring that whatever you are collecting as charges, you really earned it.
Some revenue Quality Assurance Departments are being put in various banks ensuring their quality of earnings. In terms of their charges, ATM, this costs you money to deliver services. Those infrastructure costs you money. How do we recover those investments? In other climes, they have various shades of charges, you have the power, infrastructural deficit impact on banking cost of doing business.
So, you can really see that in ATM charges, everything is stated there. If you do not want, take example alert charges, you do not want, fine. Look at the value you derive from those services. I think the banks are doing very well.
How is the CIBN going to deal with quality of earnings in several commercial banks and merchant banks among others?
The CIBN determine the rules and ethics and standards of the profession. But the regulator is the CBN and Nigeria Deposit Insurance Corporation (NDIC) and the bank examiners do go to examine the books of the banks. They have people who look at the books of the banks and see what is being done.
And they have created another avenue, from where you can redress if you have any complaints, that is the Consumer Protection Department of the CBN. You also have the Ethics Committee of the Sub-Committee of the Bankers’ Committee. If you are a bank and customers keep writing and complaining about excess charges, how will you feel? So, what banks have done is that those things affect your brand, they speak volume about you, and your governance framework. Banks are now self-regulating themselves by putting up department to check excess charges. We do not want a situation, where you earn today and tomorrow you are asked to refund. We must put a process in place to ensure the revenue is earned.
We have continually emphasized that bankers must be truthful in whatever they are doing. The only way to do that is to respect contract.
What do you think about Nigeria borrowers?
One thing you have to realize too is that we have bad borrowers. Not all, but few bad eggs trying to make some genuine people not getting loans. The genesis of all that is that banks were previously owned by the government. So, going to bank to get loan was like going to collect your own national cake. We came with that mentality that money from the bank is a national cake, not knowing that money from the bank, as aggregators they collect money and intermediate.
And so, you see them wanting to borrow and not pay back. And, if you are entering a bank borrowing relationship, you must learn how to endure risks. A good example, is that in the downstream sector, they borrowed money from the banks, and entered into sovereign risk relationship with the government. When the government did not respect their own obligations, because of loss of revenue due to drop in oil prices, there was reduction in revenue and that affected our reserves and the naira was devalued.
That hit the customers. Now, whose problem is it? The banks or the customers? It is the customers because when you enter into a relationship with government and you met with devaluation which was supposed to be hedged, it is indeed your problem. We have bad borrowers. What they are supposed to do was to restructure the loan for longer time and pay back.
Those that are good borrowers will always access funding. But you will find a situation where they borrow, decide to go to court and employ all sorts of gimmicks and not knowing the money does not belong to the banks, they are depositors’ money. So, when you see banks being very aggressive, these funds are not theirs. We are facilitating economic development. And that brings us to the issue of sanctity of law. You cannot try that in United Kingdom.
But the United Kingdom government will not fail the sovereign test?
They will not. But even at that, businesses can go bad. The borrower will not give that as an excuse to avoid payment of the debt. You do not have people go to court there. This is contract.
High interest charge is not new. But if we respect our contract, I do not think that will happen. As far as banks are concerned, we are committed to making sure that proper intermediation is done in the economy. We are making sure that we contribute to economic growth and development. Issue of real sector lending, we are looking at it as topical issues.
You said that high cost of doing business is affecting the cost to serve for the banks. But we are also seeing the banks declaring huge profits. So, what makes you think the profits are not even too high?
Which profit? Is it all the banks that are declaring such profit?
Some banks’ gross earnings are in excess of N200 billion annually. Is it not too much and the customers are crying?
Convert that in dollar terms and compare it with what happens in Europe or America. You have not talked about the capital put at risk in deriving those profits. What is the return? Because the way the economy is structured, does not give you room for long term.
Policies continue to change, you are declaring huge profits, maybe because of efficiency and deployment of right products. But really, how many banks are there making huge profits? In dollar term, how much is there? So, you just look at it from one angle. How much is the return on asset? Don’t look at it in absolute term, look at from what is the return on asset.
You do not talk about the various funds that were written off, the accidents that happened. So, whether we are making huge profits, people put their money there. They are investors like you and I. We invested in a bank as a shareholder, how much are we getting in return, that is where we will know whether they are making humongous profits. Are they charging within the framework of agreed tariffs, then, you are saying there should be freebies so that they will not make much profits. This is a capitalist economy, we are not in a socialist economy. People have put money to provide services and they should be compensated adequately.
For me, it is neither here nor there. I make bold to say that if every other sector performs well the way banking has performed, we will lift this economy out of the doldrums we are. The export we have done today is banking. We are almost everywhere around the West Coast, we are dominating. We have perfected the system, whereby people get money and get alerts. The banking sector is attracting the best brains. It is not just about efficiency, but about deploying capital affectively. This issue of huge profit is misplacement as far as I am concerned.
How far have you gone with the Competency Framework for the Banking Industry?
The Competency Framework is operational, whether it is being executed in the right manner is another issue. But we are getting the cooperation of our various bank CEOs, Human Resource Managers , and the regulator to ensure that it is implemented. We have to give full report to the regulators. It is very critical, that the right competence and skills are in the banking industry.
Does the report on state of implementation get to the institute?
We are supposed to make the report to the regulator and Bankers’ Committee on the level of compliance. Of course, the banks have set up learning academies, which are very huge investments to ensure that bankers are well equipped with the right skills and personal development that is needed. In advanced climes, we are beginning to see commoditization of competencies. So, that means that we have to commoditise our certifications.
We have certification in ethics and governance, compliance issue is taking front burner globally. We have report and compliance, processes and technology, FinTech. The first industrial revolution came and Nigeria did not participate. And so, was the second and third. The fourth industrial revolution is in the digital economy and Nigeria must not be left out. Our financial market trading dealership will be further improved on. Even oil and gas, which accounts for significant chunk of foreign inflows is involved.
What is the feedback you are getting in terms of compliance?
The feedback we are getting is that banks are complying. It is the enforcement that we will liaise with regulators to ensure that banks comply more.
What is the level of compliance you have seen. It is not total?
It is not total. It is a new thing. We had a grace period. And that was some years ago. That is over. What you are going to see going forward now is we will be pushing for implementation and possibly sanctions. The sanctions will be left for the regulator. We are not the regulator. It is people that make organisations. Organisations do not think, it is people that think. Banks are making huge investments in the Learning Academy. Some of their programmes are world-class.
We will continue to dialogue on this and follow the banks up. We also review, accredit and audit what is happening on those academies. We will begin to see a better and well-equipped financial system.
Part of the certification you talked about is banking ethics. Is that already in progress?
We are entering an alliance with a foreign institution and banks in that direction. Ethics is professionalism, delayed gratification. A professional without ethics is not a professional. So, it is a flagship certification we will roll out within this administration.