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CBN issues code of corporate governance for banks

Posted by By Chris Uba on 2006/03/02 | Views: 1082 |

CBN issues code of corporate governance for banks


Central Bank of Nigeria (CBN) has released a new code of corporate governance for banks in Nigeria. This is part of the apex bankís post-consolidation efforts aimed at ensuring stability in the financial sector and also to sustain prudent management as well as nipping in the bud the high incidence of fraud in the banking system.

Central Bank of Nigeria (CBN) has released a new code of corporate governance for banks in Nigeria. This is part of the apex bankís post-consolidation efforts aimed at ensuring stability in the financial sector and also to sustain prudent management as well as nipping in the bud the high incidence of fraud in the banking system.

The code is meant to serve as check on the banks and to shore up the confidence of the people in the banking system with a view to restoring the age-long synergy between the banks and the banking public.

Under the new banking regime ,the position of chairman /managing director and executive vice-chairman have been abolished while the number of non-executive directors must not exceed that of executive directors.

The responsibilities of the head of the Board, that is the Chairman, should be clearly separated from that of the head of Management, i.e. MD/CEO, such that no one
individual/related party has unfettered powers of decision making by occupying the two positions at the same time.

According to the guidelines ,all the directors of the banks should be knowledgeable in business and financial matters and also possess the requisite experience even as the apex bank desires a smooth and definite management succession plan. Shareholders, the guidelines said need to be responsive, responsible and enlightened while also instilling the culture of compliance with rules and regulations.
The CBN also wants a balance of power and authority in the banks so that no individual or coalition of individuals has unfettered powers of decision making. Articles of Association, the guidelines insist, should clearly specify those matters that are exclusively the rights of the Board to approve apart from those for notification.

According to the CBN, a survey by the Securities and Exchange Commission (SEC) showed that corporate governance was at a rudimentary stage, as only about 40% of quoted companies, including banks, had recognized codes of corporate governance in place.
Specifically for the financial sector, poor corporate governance was identified as one of the major factors in virtually all known instances of a financial institutionís distress in the country.

CBN also identified disagreements between board and management giving rise to board squabbles, ineffective board oversight functions, fraudulent and self-serving practices among members of the board, management and staff, and overbearing influence of chairman or MD/CEO, especially in family-controlled banks as some of the problems that militated against the Nigerian banks.
The CBN reiterated its earlier stand that no two members of the same extended family should occupy the position of Chairman and that of Chief Executive Officer or Executive Director of a bank at the same time.

The guidelines called for adequate procedures to reasonably manage inevitable disagreements between the Board, Management and staff of the bank asking the Board to meet regularly at a minimum of four regular meetings in a financial year whilethere should also be adequate advance notice for all Board meetings as specified in the Memorandum and Article of Association.
No two members of the same extended family1 should occupy the position of Chairman and that of Chief Executive Officer or Executive Director of a bank at the same time.

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Joel Efiong(Calabar, Nigeria)says...

This is a great piece. The examination bodies should hire you as ICT consultant.

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Sunday Mbe(Kaduna, Kaduna, Nigeria)says...

ULIMASI means' GOD,THANK YOU' not THANK GOD.

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Sunday Mbe(Kaduna, Kaduna, Nigeria)says...

The name ULIMASI is from the UTUGWANG tribe in OBUDU local government area of CROSS RIVER STATE in Nigeria.

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Okfold(Sobe, Edo, Nigeria)says...

I want the meaning of female owan name Ekeke (Edo state)

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Toluwalase Samuel Olufemi(Ijebu, Ogun, Nigeria)says...

Authority belongs to God, once He decrees it is final and binding