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How to prevent crisis which crippled banks in 2009 – Umaru Ibrahim

By on June 30, 2015

The Managing Director/Chief Executive, Nigeria Deposit Insurance Corporation (NDIC), Alhaji Umaru Ibrahim, has said devoting greater attention to sound corporate governance practices would be handy, preventing the kind of systemic crisis which rocked the banking sector in 2009.

Speaking in Lagos while delivering an address at the 2015 executive breakfast meeting of the Society for Corporate Governance Nigeria, he identified the absence  of sound corporate governance as one of the key factors responsible for the 2009 Nigerian banking crisis.

According to him, the special examination conducted in 2009 on the 24 banks in the country by the Central Bank of Nigeria (CBN) and NDIC had revealed that 10 banks were critically distressed as a result of several factors including poor corporate governance.

He said: “The special examination revealed that boards and executive managements in some banks were not equipped to run their institutions as their ineffectiveness manifested in the form overbearing influence of some board members, ineffectiveness of board committees; non-adherence to the CBN code of corporate governance and weak ethical standards amongst others.”

The NDIC boss further noted that the problems of the affected banks had informed the comprehensive reform embarked upon by the CBN which emphasised enhancing quality of banks, financial stability and ensuring that the financial sector contributes to the real economy.

Ibrahim also reviewed the various laws governing banking operations in Nigeria including the Banks and Other Financial Institutions Act 1991, the Companies and Allied Matters Act, the NDIC Act (BOFIA), the CBN Act and the Failed Banks Act and expressed the need for more stringent sanctions to serve as deterrent to irresponsible and greedy behaviours.

He further cited the case of the recent move by the regulatory authority in the United Kingdom to enhance supervision and management of banks with emphasis on personal responsibilities of directors.

In this regard, he stressed that both the UK companies Acts 2006 and the recent tough new banking rules are compelling some bank directors to rethink their suitability and competence to remain as bank directors, adding that some board directors actually resigned.

Ibrahim said in their bid to establish a robust and stable financial system to promote national development, supervisory and regulatory authorities also accorded priority attention to sound corporate governance in their own operations.

According to him, some of the initiatives put in place by the corporation to promote sound corporate governance, included the adoption of a charter and code of corporate governance for its board, compliance with the code of corporate governance for all regulators under the auspices of the Financial Services Regulation Coordinating Committee, code of the conduct for its bank examiners and compliance with provisions of relevant Acts of federal government on disclosure and accountability.

In a statement by signed by its Head, Communication and Corporate Affairs, Alhaji Hadi Birchi, the NDIC boss recalled that the award of ‘Best Deposit Insurance Organisation of the Year 2014 which was conferred on the Corporation by the International Association of Deposit Insurers (IADI) for compliance and international collaboration was a clear testimony of the corporation’s compliance with international best practices in the discharge of its mandate.

 

[ThisDay]