By Babajide Komolafe
Chairman, IBTC Stanbic Bank, Mr. Atedo Peterside, has faulted the Central Bank of Nigeria (CBN) on the provision of one code of corporate governance for operators in the financial sector.
â€œOur regulator-imposed corporate governance codes and arrangements does not take cognisance of vastly differing ownership/management dynamics, nor are they adjusted or fine-tuned for the unique set of risks facing each institution.
â€œOur insistence on a One-Size-Fits-All approach to Corporate Governance will therefore continue to lead us to sub-optimal outcomes.â€, he said at the 2009 Public Lecture of the London School of Economic Alumni Association of Nigeria held last week in Lagos.
Earlier, the Deputy Director, Banking Supervision, CBN, Dr. Kingsley Moghalu, said the apex bank, in collaboration with other regulators in the financial services sector under the aegises of the Financial Sector Regulatory Coordinating Committee (FSRCC), was working on a comprehensive reforms of the sector.
This, he said, includes the development of a hamonised code of corporate governance for the sector. He said there was conflict among the different codes issued by each regulator and this is exploited by operators to engage in arbitrage.
He said the hamonised code will eliminate the areas of conflict and opportunities for arbitrage adding that the code will be enforced through sanctions and penalties.
Peterside, however, faulted this approach, saying it is like recommending the same diet for everybody, a situation that makes people with excess weight to overfeed while people who are underweight may be underfed.
He said that a hamonised, one-size-fits-all code would create a situation where people with excessive power will have more power and become more dominating in their organisations.
Peterside also faulted the response of the CBN to the financial crisis vis-a-vis the Expanded Discount Window, saying it tantamount to continuously over feeding an over-weight child.
He also warned that the proposed Asset Management Company couldÂ exacerbate mral hazard problem in the banking industry.
He said, â€œMisuse of the CBNâ€™s Expanded Discounted Window as a permanent funding source created a moral hazard problem. It also encouraged illiquid banks to delay asset disposals, cost-cutting measures and the general conservation of cash in their day-to-day operations thereby making it even more likely that the regulator will eventually turn off the tap and bring down the hammer.
â€œIf care is not taken, the envisaged Asset Management Company could exacerbate the moral hazard problem. Our dysfunctional legal system is now being put to the test again. Unfortunately, the patient might die long before we resolve a suit on who has the authority to give him the required medication.