Banks urged to ‘name and shame’ loan defaulters

Banks have been told to take serious actions against chronically delinquent and non-cooperative borrowers, including naming such borrowers as well as issuing a directive that will bar them from dealing with other banks.

Governor Dr Joseph Mills Jones

The Governor of the Central Bank of Liberia, Dr Joseph Mills Jones, has said the major challenge facing the banking sector in the West African sub-region is the high level of incidence of non-performing loans, which has left commercial banks in the sub-region rocking the boat of bad debts.

Banks in the sub-region are grappling with bad debts more than ever before as their loans and advances portfolio continue to swell while increasing sums of monies given out as loans to customers continue to remain as bad debts, which are debts not likely to be paid, giving rise to banks losing huge amount in profits.

The Liberian Central Bank Governor was speaking to central bank officials and financial experts from The Gambia, Ghana, Nigeria, Sierra Leone, Guinea, and Liberia in a week-long 9th meeting of the College of Supervisors of the West African Monetary Zone (WAMZ) in Monrovia from 9 to 13 July.   

The weeklong seminar was held to discuss the establishment of a Central Bank of West Africa and address issues of a single currency system in the region, as well as address issues of the harmonization of payment system and a free trade movement for West African countries.

The seminar was held at a time when West Africa plans to introduce a single currency in the English-speaking countries of the sub-region.

Governor Mills Jones called on member states of the West African Monetary Zone (WAMZ) to standardize their regulatory processes to prevent problems created by the global financial crisis before they reach levels that will threaten the entire region.

He observed that the success of WAMZ depends on member states taking concrete steps to put in place the right system and culture of domestic regulation and the application of consistent international best practices and rules across the zone. 

The WAMZ countries hope to harmonize their payment systems in order to achieve the introduction of the single currency, to be called the Eco, by 2015.

Speaking further on the banks in the sub-region, the Liberian Central Bank Governor said:  “Banks in the sub-region must be wedded to the ethic of reform, taking into account the specific circumstances of individual member countries.

He suggested that banks should put forward a set of supervisory approaches that will achieve the right system and culture of domestic regulation in member states and the application of consistent international best practices.

The approaches include: “Deliver a forward looking, risk-based approach to regulation and supervision, at the core of which will be early intervention mechanisms to identify cross border linkages and their associated risks.

Establish adequate surveillance tools to determine the effectiveness of the corporate governance system of banks and the competency of their executives; ensure consumers have the right information to make informed judgments;  and ensure banks act in a more transparent and accountable manner.”

Dr Mills Jones also noted that achieving the above objectives means that member states must act individually and collectively to train and maintain high quality, experienced supervisors who are willing to make difficult decisions and command the respect of the banks they supervise.

According to him, the world’s economy continues to be challenged by the on-going financial crisis.

He said the crisis started as a result of debt-fuelled consumption, ill-advised banking practices, and regulatory failings mainly in the developing economies.

“One of the key lessons we have learned is that regulators cannot let their guard down, and that the regulatory process must be suitably attuned to preventing problems before they reach the scale of threatening our general welfare,” says Governor Jones.

Also speaking at the forum, the outgoing WAMZ chair, Tapsiru L. Dainkeh, said weak corporate governance is a major threat to banks achieving more profits in the West Africa sub-region.