The CBN said that the ongoing reform of  the banking sector was to combat institutional decay and disregard for corporate governance. The CBN Governor, Malam Sanusi Lamido Sanusi, said this in Lagos at the National Conference on Corruption and Good Governance, organised by Cleen Foundation. Sanusi, who was represented by Mr Kabiru Shehu, said that it became apparent that since the banks’’ consolidation in 2006, some banks had been engaged in serious breaches of corporate governance.

He cited instances where some banks had ineffective governing boards’ oversight, overbearing influence of board chairmen or chief executive officers, especially in family-controlled banks, and weak internal controls. Sanusi noted that the priority of some banks was predominantly on fostering growth at the expense of appropriate and adequate risk-management practices. He also noted that it became obvious that some banks were weak and business could no longer continue as usual.

Sanusi conceded that the initial challenges encountered in the banking reform programme included increasing crisis of confidence in the industry and how to address the menace. He stressed that the challenge was more evident in the 10 banks where the CBN intervened through the injection of funds to shore up the banks’ capitalisation.

Sanusi said that the CBN had embarked on a public enlightenment campaign to reassure investors and diplomatic missions that its action was meant to strengthen the banks rather than weaken them. He noted that some weak banks were already being discriminated against in the inter-bank market, as the stronger banks were reluctant to provide them with loans.

Sanusi noted that the banks’ reports to the CBN and investors were often not accurate,
thereby depriving the apex bank and investors the right information required to make reliable investment decisions. He also noted that the slow judicial process was also a major challenge to efforts to prosecute corrupt bank directors and recover bad loans given to their associates and others. He, however, conceded that the lack of effective coordination among key regulatory agencies in the financial system was one of the reasons behind the poor supervision of the banking system.