BANKING AND FINANCE IS RESISTANT TO CHANGE
Except you have been in the banking system, except you are a product of the banking system, except you are old, you are not building or taking over a bank.
A fallout from the poor implementation of the CBN cashless policy that has sparked nationwide violence is that social media has been awash with a lot of takes on the Nigerian financial landscape.
A particular tweet caught my attention, and everyone else's. Here’s what was said;
At first glance, such an opinion seems ridiculous and wild. I think it is, actually, but not for the reason that everyone is pointing to, i.e. the capital requirements to acquire the license and establish a banking business that can be properly so-called. Raising money is not the problem. Investment bankers will raise any amount needed in the blink of an eye. They know where the money resides and would cut the right deal to get the money on the table.
The thing is that some problems exist because they are a feature of an institution, but new entrants may think they are problems to be solved. They are not problems to be innovated around and whatnot, they are problems that ensure that things continue to work how they have always worked.
Yes, the founders of banks are old and rich, and that is because old money mints new money. The barrier to entry is so high that the only way any new entrant can make it into the system is by being backed by old money. It is just the way of the world.
Take, for instance, the all-so-novel field of blockchain and crypto banking. It turns out the Venture Capital funding them are the same people who created the traditional banking system that the blockchain is supposed to unseat. Even on the blockchain, where money is minted from thin air, there is the need for actual fiat money to push the acceptance of the minted coins. It is all a game that runs because the old money permits it.
The law itself ensures that anyone in the banking and finance system is “old and rich”, and no amount of brilliance and innovation is going to convince the lawmakers who are old to reduce the barrier to entry. Perhaps, it is for good reason, too. I would illustrate how the law ensures that only the old can run the banking system and that the persons operating in the space are always recycled.
Before you can become a director or senior management staff in a licensed financial institution, you must meet the requirements of the Central Bank of Nigeria (CBN)’s REVISED ASSESSMENT CRITERIA FOR APPROVED PERSONS’ REGIME FOR FINANCIAL INSTITUTIONS (opens in a PDF). The simple fact is this, no FinTech Bro is getting or taking over a bank anytime soon.
I would keep it short and reproduce the requirements verbatim. They are quite self-explanatory. You would start to see why raising capital is arguably the least worrying concern.
To be a Managing Director;
A minimum of first degree or its equivalent in any discipline plus a higher degree or professional qualification in any business-related discipline.
Candidates must also have a minimum of 20 years post-graduation experience, out of which at least 15 must have been in the banking industry and, at least 2 as DMD/ED, with responsibility in several areas of banking operations including business development and customer relationship management
To be a Deputy Managing Director or Executive Director;
A minimum of first degree or its equivalent in any discipline plus a higher degree or professional qualification in any business related discipline
Candidates must also have a minimum of 18 years post-graduation experience, out of which at least 13 must have been in the banking industry and, at least 2 as General Manager. Evidence of experience in several areas of banking operations including business development and customer services management
I could go on and on, but I think you get the idea now. You can also read the requirements yourself, I already linked them above.
Here is the gist. Except you have been in the banking system, except you are a product of the banking system, except you are old, you are not building or taking over a bank.
Even with the recent onslaught of fintechs acquiring Microfinance Banks, the truth is that the persons operating these fintechs simply cannot operate the bank. The law ensure that while nouveau riche may put in money, but the banking system would always be run by familiar hands. Hence, the reason there is a lot of poaching in the banking sector. The number of persons qualified to hold crucial positions are far less than the job openings.
Sorry, but Banking and Finance is resistant to change.
Post-credits: Today’s episode was edited by Feyisekemioluwa Akande who I might as well officially employ, if I could afford to pay her money’s worth
I love how each new piece leaves me extra enlightened. I only wish I knew about the criteria assessment for banks DMD/EDs before submitting an article about a month ago on a similar topic. Thanks for sharing.