CORPORATE GOVERNANCE

Corporate governance: CBN to screen shareholders, directors of banks

To address the challenges of weak corporate governance, the Central Bank of Nigeria has said that it will screen those who are fit to be shareholders, directors and managers of banks.
The Acting Director, Financial Policy and Regulation Department, CBN, Mr. Chris Chukwu, said this in Benin City, Edo State, while speaking on the role of the CBN in ensuring a sound, safe and reliable banking sector.
He said, ”To address the challenges of weak corporate governance, the CBN is reviewing the ‘fit and proper persons‘ regime in order to ensure that only credible persons of impeccable financial, personal and professional character are allowed as major shareholders, directors and managers of banks.”
The CBN, he added, had strengthened its on-site and off-site supervision functions in recognition of the need for an effective supervision of the banking supervision of the sector.
According to him, the regulatory arm commenced risk-based supervision and abandoned the former compliance-based supervision approach.
He noted that off-site supervision, a qualitative diagnosis or the core of banking regulation seeks to critically evaluate the operational parameters of a bank and its compliance with operational requirements.
He noted that the Nigerian banking sector was tipped into crisis by the global financial crisis as a result of a number of independent factors, which included macroeconomic instability, major failure in corporate governance at banks and limited knowledge of investment principles by investors and underdeveloped consumer protection.
Others, he added, were transparency about the true financial condition of banks and gaps in regulation.
He observed that the inability of the regulatory authorities to properly and on a timely basis identify the weakness in the banking industry through effective supervision contributed to the sector‘s shock.
According to him, the recent initiative by the CBN to reverse the deterioration in the financial condition of banks culminated in the initiation of a four pillar reform programme with the objective to enhance the quality of the banks, establish financial stability, enable the evolution of a health, financial sector and ensure that the financial sector contributes to the real sector of the economy.