The Nigeria Deposit Insurance Corporation (NDIC) has advised operators of Primary Mortgage Banks (PMBs) in the country to always comply with regulatory policies so as to avoid the build-up of risk in the sub-sector.
Managing Director/CEO of NDIC, Umaru Ibrahim gave the charge yesterday, at the corporation’s 2014 Sensitisation Workshop for Operators of Primary Mortgage Banks (PMBs), organised at the Transcorp Hilton Hotel, in Abuja.
The workshop focused on the theme: “Developing and Implementing Sustainable Effective Risk Management in Primary Mortgage Banks in Nigeria.”
The MD/CEO pointed out that the corporation’s attention is now “being focused on both MFBs and PMBs so as to address the emerging challenges.”
According to him, “our efforts can only be successful if the operators can embrace good corporate governance and sound risk management practices.”
The NDIC boss pointed out that the institutionalisation of the Nigeria Mortgage Refinance Corporation (NMRC) as a wholesale financial institution that refinances portfolios of PMBs and Deposit Money Banks (DMBs) implies a shift of required core competences of PMBs to areas such as deposit mobilisation, creation of risk assets, among others. Furthermore, he stressed that the creation of the NMRC, a market of more than N59.5 trillion, implied that PMBs are set to experience phenomenal growth.
He added: “You may recall that the global financial crisis of 2007 to 2009 was mainly due to the problems in the US mortgage sector. As we are well aware, the mortgage markets are inextricably linked to the functioning of the economy, both in the United States and worldwide.
“The US sub-prime mortgage crash exacerbated by the interconnectedness between real estate and financial institutions, as well as poor corporate governance practices and weak risk management at many systemically important financial institutions, led to one of the biggest crisis the world has ever witness.”
Ibrahim noted that weak corporate governance and weak risk management could result to risky behaviours by PMBs, thereby creating huge toxic assets.
According to him, the workshop was to sensitise operators on their responsibilities in order to ensure that they run their institutions in safe and sound manners as well as to take advantage of developments in the economy.
He also said the programme became necessary because of growing opportunities for the operators to finance more housing delivery and to access cheap and long-term funds.