Lagos — The Central Bank of Nigeria (CBN) and the 24 Nigerian banks (Participating Banks) have signed a Memorandum of Understanding (MOU) on the establishment of a Banking Sector Resolution Cost Fund tagged (the Sinking Fund) to meet any shortfalls that may arise from the management and realization of the eligible bank assets to be acquired by the Asset Management Corporation of Nigeria (AMCON).

Speaking during the signing ceremony attended by the chief executive officers of the 24 banks in Lagos on Friday, Dr. Kingsley Chiedu Moghalu, Deputy Governor, Financial System Stability said under the scheme, the CBN shall contribute N50 billion annually to the fund and each participating bank shall contribute an amount equivalent to 30 basis points of its total assets as at the date of its audited financial statements for the immediately preceding financial year.

The CBN and the Participating Banks, he said, would make contributions to the Sinking Fund over a period of ten years from today.

Today, we are witnessing another important milestone in our resolve towards addressing the challenges to the banking sector that we have had to contend with since 2009 following the global economic crisis of April 2008. Our gathering is to sign a Memorandum of Understanding between the Central Bank of Nigeria and the 24 Nigerian Deposit Money Banks on the establishment of the Banking Sector Resolution Cost Sinking Fund ("the Sinking Fund")", he said .

Moghalu said the role of banks in this regard is unique and they deserve commendation. This is because in most jurisdictions, it was the national governments alone through their treasuries that bore the cost of stabilizing the banks and preventing bank failures, adding that the tax payers in those countries almost exclusively bore these costs.

In Nigeria's case, the burden on the national treasury is significantly reduced by this innovative approach in which the resolution costs of the recent banking crisis will be borne by commercial banks themselves in addition to the CBN and AMCON", he said .

Tracing the genesis AMCON, Moghalu said establishment of the Asset Management Corporation of Nigeria (AMCON) was to assist in the resolution of the high level non-performing loans in the banking industry and help banks in cleaning up their balance sheets as part of the reform programs initiated by the Central Bank of Nigeria.

He said the establishment of the Banking Sector Resolution Cost Sinking Fund will ensure that the government will not bear the cost of this financial crisis in future while the cooperation of the Bankers Committee in the funding of the scheme is highly appreciated.