Banking is one of the few businesses in which failure rarely affects only the owners of the business. When a bank gets into trouble, depositors, employees, businesses, investors and, ultimately, the wider economy can pay the price.
That is why banks are regulated.
The current debate around the limits of regulatory intervention in Nigeria’s banking industry should therefore concern everyone with an interest in the stability of the financial system. Recent court decisions challenging actions taken by the Central Bank of Nigeria (CBN) raise an important question: how much authority should a financial regulator have to intervene when it believes a regulated institution is breaching established rules or threatening financial stability?
The question is not new.
Nigeria’s banking history offers several reminders of what can happen when weaknesses within the system are allowed to persist for too long.
