Page 72 - ACCESS BANK ANNUAL REPORTS_eBook

affect our business. nomic activity”.

Stress testing and scenario analysis are used to assess The Central Bank of Nigeria designated eight banks as Do-
the financial and management capability of Access Bank mestic Systemically Important Banks (D-SIBs) in November
to continue operating effectively under extreme but plau- 2013 and issued requirements for Recovery and Resolution
sible trading conditions. Such conditions may arise from Plans to be submitted by 1st January of every year. Access
economic, legal, political, environmental and social factors. Bank was designated as a D-SIB, as such, we have updated
Scenarios are carefully selected by a group drawn from se- the Bank’s 2017 Recovery Plan (‘Recovery Plan’) and sub-
nior business development, risk and finance executives. Im- mitted this to the relevant regulators. The Recovery Plan is
pacts on each line of business from each scenario are then updated once a year at least to reflect changes in the busi-
analyzed and determined, primarily leveraging the models ness and the regulatory environment.
and processes utilized in everyday management routines.
The Recovery Plan equips the Bank to re-establish its finan-
Impacts are assessed along with potential mitigating ac- cial strength and viability during an extreme stress situa-
tions that may be taken in each scenario. Analyses from tion. The Recovery Plan’s raison d’être is to document how
such stress scenarios are compiled for and reviewed we can respond to a financial stress situation that would
through our Group Asset and Liability Committee, and the impact our capital or liquidity position. The plan outlines a
Enterprise Risk Management Committee and serve to in- set of defined actions, aimed to protect us, our customers
form and are incorporated, along with other core business and the markets and prevent a potentially more costly res-
processes into decision making by management and the olution event.
Board. The Bank would continue to invest in and improve
stress testing capabilities as a core business process. In preparing the Recovery Plan, we leveraged the following
guidelines:
RECOVERY AND RESOLUTION PLANNING
• Central Bank of Nigeria (CBN) Minimum Contents
The 2008/2010 global financial crisis exposed Nigeri- for Recovery Plans and Requirements for
an banks and the economy in general to unprecedented Resolution Planning. November 2016
stress. Poor risk management in Nigerian banks led to the • European Banking Authority (EBA):
concentration of assets in certain risky areas. The concerns
stemmed from the huge deterioration in the quality of • Regulatory Technical Standards
banks’ assets, liquidity concerns and low capital adequacy (EBA/RTS/2014/11)
ratios. Consequently, the Central Bank of Nigeria had to in- • Guidelines (GL/2015/02)
tervene to prevent a total collapse of the industry and cre- • Prudential Regulations Authority (PRA)
ate stability in the Nigerian financial sector. Policy and Supervisory Statements
(PS1/15 and SS18/13)
The Asset Management Corporation of Nigeria (AMCON) • Financial Stability Board (FSB) Guidance
was set up in 2010 to relieve banking sector balance sheets on Recovery Triggers and Stress Sce
of Non-Performing Loans thereby stimulating lending to narios dated 16 July 2013
the real sector. AMCON has over the period intervened
by acquiring Eligible Bank Assets (“EBAs”), issuing financial Recovery indicators are metrics that can be used by the
accommodation securities and employing the bridging op- Bank to define the points at which at which action can be
tion to establish bridge banks as a form of resolution. The taken under the recovery plan. Indicators are qualitative and
various regulatory interventions have been at the expense quantitative in nature, and draw on our risk appetite and
of taxpayers and infrastructural and human capital develop- existing risk management frameworks. The Bank currently
ment being the opportunity cost. has several risk related frameworks in place for both finan-
cial and non-financial risk, such as the Enterprise-wide Risk
The various banking crisis revealed that many banks were Management (ERM) Framework, Contingency Funding Plan
insufficiently prepared for a fast-evolving systemic cri- (CFP) and Business Continuity Plan (BCP), amongst others.
sis and thus, were unable to act and respond in a way that The Bank’s qualitative and quantitative indicators are drawn
would avoid potential failure and prevent material adverse from our existing risk management frameworks.
impacts on the financial system and ultimately the econo-
my and society. Quantitative indicators include Capital, Liquidity, Asset
Quality and Earnings indicators. In addition to these, mac-
The Financial Stability Board described Systematically Im- roeconomic and market-based indicators are used by us
portant Financial Institutions (SIFIs) as “financial institutions to proactively signal negative trends which may harm the
whose distress or disorderly failure, because of their size, Bank. These triggers provide input and support for the con-
complexity and systemic interconnectedness, would cause tinuous monitoring of possible adverse situations and may
significant disruption to the wider financial system and eco- indicate potential changes in the four key indicators. The

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Annual Report & Accounts 2017