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Banks need strong boards to avoid crisis – BDAN

By on November 27, 2014

The President, Bank Directors Association of Nigeria, Dr. Sonny Kuku, says banks in the country need strong board of directors in order to avoid further crises in the banking sector.

He said the roles of banks’ boards were very critical to the successful operation of financial institutions and, as such, there was the need for lenders to fill board positions with the right mix of qualified personnel.

Kuku spoke at the 2014 Stakeholders Forum organised by the BDAN in Lagos.

He said, “Competition has always been contentious in banking, and regulators have traditionally tried to restrict competition in the industry with the aim of avoiding excessive risk-taking. A fully fledged liberalisation process was later put in place in many countries and there was consequently a notable increase in bank failures.

“To avoid further crisis in the industry, there is the need to ensure that strong boards govern our banks.”

Bank directors, he further noted, must be well remunerated for the challenging roles they play.

According to him, board members remuneration must be taken more seriously at every bank as this will help them to attract the right individuals for the board positions.

He said, “In the boardroom, directors make a lot of decisions which may make or mar the organisation. It is, therefore, pertinent to ensure that the right mix of individuals sit on the boards.

“This has to do with people who have the requisite skills and knowledge to continually grow the bank, while ensuring that the bank is able to effectively compete domestically, and in the long run become a global institution.”

Consequently, he explained that the health of every bank, every organisation, “depends on a strong, independent, and attentive board that adopts effective” corporate governance practices.

He added, “We are also aware that directors have some fiduciary responsibilities to the bank’s shareholders, depositors, regulators and communities they serve. These duties of the managers of the business have become very critical now more than ever.

“As you know, the boards of banks have recently been under a very close observation, and they have been told to keep up with the times in outlook, ideas and information as they will not be excused if anything should go wrong within their organisations.”

The Partner and Head, Financial Services at KPMG Professional Services, Mr. Ayodele Othihiwa, who was the guest speaker at the event, also emphasised the need to strengthen banks’ boards.

He quoted the former Governor of the CBN, Mr. Lamido Sanusi, as saying that the 2009 banking crisis in the country was caused by the failure of corporate governance in banks.

Othihiwa also quoted the David Walker report of 2009, which linked the United Kingdom banking industry failure to corporate governance failure in banks.

“Against the background of defective controls and serious excesses and conflict of interest and biases, there is a strong need to have a code of conduct and conflict of interest policies to guide all board members, executive management and staff of banks on acceptable patterns of behaviurs,” he added.

The Chairman, Standard Chartered Bank, Mr. Remi Omotoso, who was the chairman of the forum, noted that 2015 might be more challenging for banks, and there was need for lenders to get prepared.

Consequently, he advised board members to be ready to show the stuff they were made of.

 

[Punch]