By Enitar Ugwu

This was made known to The Guardian at the weekend by the bank's spokesman, Mr. Festus Odoko.

According to Odoko, the system is now fully operational and all the 25 banks are now connected.

The e-FASS is a system that will enable the CBN to monitor the transactions in all the banks without necessarily sending inspectors there.

The practice prior to this innovative system, was for the CBN inspectors to visit the banks from time to time in order to inspect their books.

However, experience has shown that such a monitoring device is incapable of checkmating malpractices in banks because such banks usually source funds to shore up their deficits prior to the visits of the CBN inspectors, thereby denying its officials knowledge of their true financial position.

This usually led to the worsening health of such banks before the CBN got wind of the development.

To stop this, the CBN, with effect from January 1, 2004, raised banks required minimum capital adequacy ratio from eight per cent to 10 per cent.

Part of its banking reforms in 2004 included the automation process for the rendition of returns by banks and other financial institutions through the e-FASS.

Meanwhile, money market pundits are of the opinion that the whittling down of number of banks from 89 to 25 through the consolidation programme will help the CBN in its surveillance efforts.

This was indicated when the CBN in its 2004 annual report revealed that its surveillance activities during the year involved the wholesale examination of 59 banks, five discount houses and eight offshore outfits of some Nigerian banks.

The routine examination, the report said, covered prudential regulations, foreign exchange operations, anti-money laundering controls and Know-Your-Customer (KYC) directives.

It explained that the examinations were aimed at determining the extent to which banks had complied with the banking rules and regulations as well as their financial conditions.

The CBN also conducted follow-up examinations on some financial institutions to determine their compliance with its recommendations as contained in previous examination reports, it said.

Instructively, the apex bank noted that the prudential examinations revealed various lapses in some of the institutions, including, under-capitalisation, weak internal control systems, granting of credit with inadequate collaterization, poor asset quantity, and weak corporate governance.

Specifically, during the period under review, the apex bank revealed that 54 banks contravened various CBN regulations and guidelines 99 times, as against 37 banks that contravened 66 times in 2003.

The routine examinations of foreign exchange operations of the banks, it said, also revealed various breaches, including non-compliance with open position limits, failure to repatriate interest earned on foreign exchange market funds, non-distribution of the naira proceeds repatriated on letters of credit transactions to eligible customers, excess charges by banks on foreign exchange transaction, recycling of airline tickets for invisible trade transactions, disbursement of foreign exchange without complete documentation; and failure to render specified returns to the CBN.

Anti-money laundering and CYC examinations revealed that banks violated various provisions of the law, the report also stated.

These violations include non-disclosure of reportable transaction, late or incomplete and non-rendition of returns; inadequate training of staff on money laundering measures and combating financing of terrorism, and inadequate customer identification.

The report also noted that special examination or the level of compliance with the provisions of the guidelines on inward money transfers revealed that some banks breached the provisions.

The offences included deduction of arbitrary charges and commissions from the amount payable to beneficiaries, application of exchange rates that were lower than the CBN rates in conversion of foreign currencies, splitting of remittance to evade reporting of the transactions under section 2 of the money laundering Act; and payment to beneficiaries without the stipulated identification.

The CBN report also stated that analysis of banks' prudential status showed that nine banks failed to meet the required minimum Capital Adequacy Ratio (CAR) of 10 per cent as at the end of December, 2004.

Of this number, six banks recorded negative CAR, it said.

Fourteen banks also failed to meet the prescribed minimum liquidity ratio of 40 per cent, while two had negative liquidity ratios, the report submitted.