By Michael Eboh
CENTRAL Bank of Nieria (CBN) is set to introduce a new benchmark for supervision of banks in the country, The bank stated that in the new dispensation of banksâ€™ supervision, it will increase its focus on the banks and ensure strict assessment of the performance of banksâ€™ Board of Directors and leadership.
Speaking at the Third annual EuroFinance Conference on Treasury, Risk and Cash Management in West Africa, the Governor of the CBN, Mallam Sanusi Lamido, represented by Mr. Kingsley Moghalu, Deputy Governor, Financial Sector Surveillance of the CBN, stated that the apex bankâ€™s decision to assess the performance of banksâ€™ leadership is to ensure strict compliance to corporate governance principles and transparency.
Sanusi lamented the absence of independent directors on the Boards of most of the banks and quoted companies on the Nigerian Stock Exchange (NSE), noting that this negates good corporate governance principles and if not addressed soon will lead to a recurrence of issues that led to the crisis that rocked most of the banks.
He said, â€œThe whole challenge of corporate governance is to make sure that the Board and management, most especially, the Board does what it is supposed to do. What does that mean? It means that assesment of Board performance must be one of the new benchmarks. It is not enough to have a Board, but the performance of the Board and the leadership must be assessed
â€œThat is one of the reasons the CBN introduce the tenure limits for banks. It is to encourage the culture of the assessment of the leadership of these companies.
â€œMany of the banks and many quoted companies on the Stock Exchange, still does not have independent directors. It is very important to appoint independent directors to Board and it is very important to set clear guidelines and roles for these directors. This is more important for corporate governance to move forward.â€
He further stated that the proposedÂ Asset Management Company (AMC) is expected to become fully operational during the end of the second quarter of 2010, while it also intends to conclude the sale of the eight banks whose management it took over, before the end of June 2009.
According to Sanusi, the CBN through its committee is looking at putting in place these programmes before the end of the year, while the reform process goes on until there is total stability in the financial system.
He said, â€œWe expect that the by the second quarter of the year, the Asset Management Company would have become fully operational while by the end of June, we expect that most of the strategic partners, the mergers, the acquisition of these banks, among the banks, the investors, would have been taken place. Hence, what we are looking at, is that by the end of the year, these two things are fully on stream.â€
Sanusi also stated that the CBN has developed and is set to introduce, in the next couple of weeks, rules and regulations guiding margin lending by banks in the country.
It will be recalled that the total exposure of banks to margin facilities in the capital market is put at over N1 trillion, while the total exposure of the banks sanctioned by the CBN in its latest reforms programme was put at about N500 billion.
He explained that the introduction of the guidelines will help forestall a recurrence of the factors that led to the crisis in the banking sector.
He said, â€œWe know that a lot of the problems in the banks were caused by margin loans. There were no regulation guiding margin loans and margin trading in the Nigerian capital market.
â€œRight now, we have developed a comprehensive set of rules that will govern margin trading in the market and we will be announcing these rules in the next few weeks.