By Babajide Komolafe
The Central Bank of Nigeria, CBN, will soon introduce new criteria for appointments to banks’ board of directors.

Deputy Governor, Financial System Stability, CBN, Mr Kingsley Muoghalu, dropped this hint in Lagos, yesterday, saying the apex bank is currently reviewing the whole essence of fit and proper persons to be appointed on bank boards as well as approved persons regime for sensitive roles in the banks.

Addressing journalists at the conference on risk governance for boards of directors and senior managers, he said the new regime would now emphasis character and experience level from diverse backgrounds as against the current regime which emphises  financial know-how. The essence is to ensure directors are  able to contribute meaningfully to decision making on the board even with little or no knowledge in finance.

Moghalu said being on the board of a bank had gone beyond attending meetings four times a year. Risk management, he said, was no longer the exclusive preserve of senior management, as boards of financial institutions must now be involved in risk governance, making sure that risks are evaluated in the appropriate strategic context.

He said bank boards must give direction and tone at the top, thereby ensuring a top to bottom building of risk culture down the entire organisational hierarchy.

He said the apex bank was looking at elevating certain functions within the industry like risk management, information technology to board and senior management positions with greater emphasis on the role of internal control system and audit.

In his keynote address earlier at the conference organised by the Global Association of Risk Professional, GARP, and AME & T Group, Muoghalu said: “Top on the new requirements include the prescription of the minimum cadre of staff to head the internal audit function, the head of the unit to report directly to the board audit committee, which should be composed of only non-executive directors and ordinary shareholders appointed at annual general meetings.”

He identified challenges that boards and senior managements of banks face to include the poor knowledge of risk management by most bankers, giving rise to the need for sustained education of directors, managers and staff.

While stressing that risk governance remains necessary, he lamented a situation where “too many bankers still conflate avoidance of lending to all but a few blue-chip companies with “risk management.” Muoghalu said while the CBN is not contemplating a return to the years of

sectoral allocations, it continues to call attention to yearning opportunities in the agricultural sector. Nigerian banks, he said, must learn to be part of the real economy, adding that they can still break even and make profit from lending to small and medium enterprises, among others, besides the requirement that they must open agric desks.

“The whole idea of risk management is not so that there will be no bad loans, that is not realistic. If the real economy does not develop, the banking sector will not be sustainable, he said. Continuing, he said those who are not seeking a safe lending environment outside of the blue-chips and multinationals are distorting the financial system.

Muoghalu further expressed hope that “despite the challenges, the future outlook for the Nigerian banking industry in terms of risk governance is bright. This is because the CBN initiatives will continue to impact positively in addressing most of the risk governance issues.”

One way this will be achieve, he said, is through the regular dialogue with chief risk officers of banks and chairmen of appropriate committees of bank boards, so as “provide closer guidance to banks on risk governance to banks on risk governance management.”