Expert urges bank to strengthen portfolio analysis ahead CBN’s stress tests deadline
An enterprise risk management expert, Idris Adeleke, has urged banks to prioritise portfolio analysis and strengthen data gathering processes as the Central Bank of Nigeria (CBN) moves to implement a
- By Precious Igbonwelundu
An enterprise risk management expert, Idris Adeleke, has urged banks to prioritise portfolio analysis and strengthen data gathering processes as the Central Bank of Nigeria (CBN) moves to implement a risk-based capital requirement framework.
Adeleke spoke at a webinar organised by a technology-driven rating agency, DataPro, on the apex bank’s stress testing directive issued on March 6. The directive, which takes effect after the conclusion of the banking sector recapitalisation exercise, will require banks to submit board-approved stress test reports by April 30.
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Adeleke urged banks to begin immediate portfolio reviews once their March 31 financial figures were finalised.
He stressed the need for early data gathering, migration of credit exposures and coordination among risk, finance and compliance teams to meet regulatory timelines.
According to him, the stress testing exercise would signal the regulator’s transition from fixed capital requirements to a risk-based framework aimed at strengthening the resilience of the financial system.
The exercise will assess how banks can withstand adverse economic conditions and determine whether their capital buffers are sufficient to absorb potential losses arising from deteriorating asset quality.
Under the directive, banks are expected to assume severe deterioration across credit exposures, apply additional provisioning to vulnerable sectors and treat insider-related credits as default exposures.
Adeleke said the framework aligned with provisions of the Banks and Other Financial Institutions Act (BOFIA) 2020 and was intended to ensure newly raised capital is not eroded by existing non-performing assets.
He added that stress test outcomes would guide each bank’s capital requirement until the next supervisory cycle, while supporting broader financial sector stability in line with the Federal Government’s target of building $1 trillion economy under President Bola Ahmed Tinubu’s economic reform agenda.
