Bankers advocate for law on retail banking risk management

Bankers have stressed the need for the National Assembly to enact a law that would mitigate the risks associated with loans given to Small and Medium Enterprises (SMEs).

This was the unanimous view of bankers at the 2nd West Africa Retail Banking Dialogue Session in Lagos organized by the Asian Bankers in collaboration with First Bank of Nigeria (FBN), yesterday.

The Group Head, Retail Banking, Lagos Island, FBN, Mr. Tunde Owolabi, who represented the bank’s Group Managing Director, Mr. Bisi Onasanya at the event, said banks in the country needed to come together and lobby the National Assembly to enact a law that would help secure them from grave risks associated with retail banking.

He noted that this would give banks the leeway to financing SMEs, which are said to be the backbone of economic development, without the fear of exposture to a lot of risk.

“Government just gives banks intervention funds to give to some sectors of the economy, but expect the banks to shoulder the risks involved,” he added.

This, he said, made banks to give these intervention funds to corporate customers, because of the high risk involved in loans given to SMEs.

Mr. Owolabi, however explained that significant progress has not been made in agency banking in the country, because of poor infrastructure.

On his own part, Chief Operating Officer, Domestic Bank, Ecobank, Mr. Rotimi Nihinlola reiterated that retail banking is very risky and this has inhibited its growth in Nigeria.

According to him, to get the best out of retail banking, there must be proper risk management, which he said starts with customer segmentation.

“Retail customers should not be served the same way. You have to move from traditional retail banking system to automated system to be able to make the best of retail banking,” he explained.

The Chairman, Asian Banker, Mr. Emmanual Daniel, disclosed that his organization decided to organize the dialogue session to enable banks in the sub-region run retail banking properly, sounding a warning that if is not well managed, it could destroy a bank.

He stressed the need for banks to carry out gap analysis to enable them remain profitable and sustainable.

“We think as competition increases in Nigeria, there would be greater merger and acquisitions. In other words, there would be fewer large players over a period of time,” he projected.

He advised Nigerian banks to benchmark themselves with other emerging markets that have similar size and GDP.

“Markets like Indonesia have similar challenge with Nigeria as it is very expensive to provide retail services across a large diverse country,” he further explained.