S69: Custodianship | The Bank
Talk the talk (EP 6) | 27 - April - 2024
This is Sirflex speaking, Your Host! GM everybody, i officially welcome you today's space.
Talk The Talk (EP 6)
In today's series, I have one poll & one question for you.
Custodianship | The Bank
on 28th of March 2024, The CBN increase the capital base of banks from 25Bn to 500Bn. and they have to comply with this within the next 24months.
Your question will centre around what is capital base and why will the banks deposit money to CBN.
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Engage the polls, engage the comment section, and show reactions so we can all have a wonderful experience today.
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At the end of today's series, we must have been able to
Talk about The Bank of now and the future
Custodianship
Bridging the banks and custodianship
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The bank of now and the future
21 commercial banks, 860 microfinance banks, 5 discount houses, 64 finance companies, and 5 development finance banks.
with the introduction of new capital base, how many banks do you think will be left in Nigeria?
but how have you thought about what lead to capital base concept introduced by CBN and has it actually helped!
let's look at 4 scenarios that happened in Nigeria to answer that question?
The 1990s Banking Crisis: During this period, Nigeria experienced a banking crisis where numerous banks failed due to high levels of non-performing loans, fraud, and insufficient capital. This crisis led to the eventual liquidation of many banks.
Early 2000s Instability: Despite reforms initiated after the 1990s crisis, the Nigerian banking sector still faced challenges with some banks struggling to meet new capital requirements. This period was marked by the consolidation of banks to meet the CBN's increased minimum capital requirements.
2005 Banking Consolidation: The CBN, under the leadership of then Governor Charles Soludo, mandated a significant increase in the minimum capital requirement for banks from 2 billion Naira to 25 billion Naira. This policy aimed to strengthen banks' capital bases to make them more solvent and capable of supporting larger and more diverse economic activities. The consolidation led to a reduction in the number of banks from 89 to 25, eliminating weaker and under-capitalized banks through mergers and acquisitions.
2009 Financial Crisis: Despite the 2005 consolidation, another wave of financial instability hit in 2009 due to the global financial crisis and exposure to bad debts in the oil and gas sector. The CBN intervened by auditing banks, resulting in the exposure of significant non-performing loans and poor governance. Several banks' CEOs were dismissed, and some banks were bailed out by the government.
The role of Banking in Nigeria and it's presentation.
the questions we are set today is why do you deposit money in the bank.
over the week, i tried to open an account in the bank and for the first time, i read the terms and condition. and a particular section caught my interest
it says
Distribution of Profit & Loss
"the bank collects deposits and deploys the deposit in a pool of investment in permissible ways, As defined in the Article 3 regarding unrestricted loss, if any, "
then it further went ahead and say
Profit and loss shall be calculated on monthly basis and credited to the depositors for saving accounts and at the end of tenor for term deposit accounts.
For the term deposit, our share in the profit shall be determined on the basis of a sharing percentage determined at the time of opening the account, this percentage may change at the time of each renewal subject to 3 business days' personal notification.
The Bank shall not pay nor promise to pay to a customer's account any dividend or profit in the form of cash, in kind or benefit derived from the use of the money in the account!
Custodianship
so what then is custodianship?
if the banks take deposit from people and send it to pool of investment, the investment is expected to be a purchase of security for expected profit.
fractional reserve banking!
colonized interest.
Your money, your choice
Conclusion
if you have what it takes to own your money, take that option, if you have what it takes to own your data, take that option, always take the option that put everything in your control.
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