As CBN strengthens department for bank supervision
It is expected that insider related abuses in the banking sector will reduce as the Central Bank of Nigeria (CBN) strengthens its supervisory department for effective supervision of financial institutions.
Godwin Emefiele, governor of CBN, last week threatened to go tough on bank directors over high level of insider related issues in banks and Other Financial Institutions (OFIs).
He said the CBN shall continue to deploy more robust and risk-sensitive supervisory framework in line with global best practices, in consonance with the rapidly changing environment to nip potential crisis in the bud.
“We have stepped up capacity building in our supervisory departments to ensure that our Examiners are equipped with the requisite skills and tools to effectively supervise banks and other financial institutions”, Emefiele said this in Lagos at the CBN and FITC continuous education programme for bank directors and other financial institutions.
The Nigeria Deposit Insurance Corporation (NDIC) had disclosed that Insider related lending in the nation’s banking sector accounts for N740 billion or 40 percent of the total N1.85 trillion Non Performing loans of deposit money banks (DMBs).
Yes we are going to get tough because it is a dynamic environment and we still see cases of insider abuses and the CBN is currently looking at a few and will take drastic action against those insiders”, Emefiele said in Lagos.
He explained that Insiders or core shareholders of banks are people who have been directly used by God to set up those institutions. “They truly do not own those institutions, even though they are important, the more important stakeholders in the bank are the depositors and there is need for us to protect them. That is why I said independent directors must remain independent and perform their roles and responsibilities no matter how tough it is”.
Delivering a keynote address on the theme “The Next Level of Corporate Governance Practice”, at the 12th edition of the CBN – FITC programme, Emefiele said Corporate governance is undoubtedly an essential pillar in financial system stability.
The governor reminded bank directors that ensuring good governance practices is a responsibility of all stakeholders, adding that shareholders by virtue of their long-term interests in ensuring the safety, soundness and stability of their investments in the financial system, also have crucial roles to play in taking corporate governance to a higher level by appointing skilled, capable and experienced directors. Auditors, both internal and external of institutions have no less roles.
The role of the independent directors on ensuring sound corporate governance practice is equally significant. The expectation from them is not just their independence from the management of the business but more importantly vast technical and managerial expertise.
Emefiele disclosed that the CBN will in the near future conduct studies to evaluate the effectiveness of independent directors on the board of financial institutions since the practice came into being in 2010.
“It is my conviction that the next level of corporate governance practice by financial institutions in Nigeria is a call for collaborative thinking for a joint action. The commitment to excellence in corporate governance matters is a shared responsibility. Regulators and operators should always bear in mind that the credibility, resilience, soundness and efficiency of the financial industry rest squarely on good corporate governance regime”, he said.
Speaking at the event, Okwu Joseph Nnanna, Deputy Governor, Financial System Stability CBN, said good corporate governance breeds trust and confidence which are critical success factors for banking and other financial institutions.
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