Leadership (Abuja)
Justus Nduwugwe
9 November 2007
The Central Bank of Nigeria (CBN) has restated that no bank would survive, even with large capital base, without good corporate governance practices.
The special adviser to the CBN governor, Mr Pat Ataman, made this remark yesterday in Enugu at the ongoing 11th seminar organised by the CBN for the finance correspondent and business editors.
According to him, " no matter the capital base of banks, no bank will survive without good corporate governance."
He said that there is no game without rules in the financial system, especially now the country wants to be among the top 20 economies by the year 2020.
Ataman, who represented the CBN governor, Professor Chukwuma Soludo, pointed out that the failure of banks in the past was due to lack of good corporate governance in the industry. He further explained that good corporate governance means good management, accountability, adding that good management principles, risk exposure and non performing loans had adverse effect on good corporate existence of the institution.
"Some years back, we had bank failures which were due to lack of good corporate governance, and good management principle, risk exposure and non performing loans had adverse effect on good corporate existence", he added.
He stated that the CBN has rules and regulation which stipulate the roles of the chief executive, independent directors, directors, audit committee and the roles of management to ensure good corporate governance.
He, however, stated that during banking consolidation, the CBN tried to build these rules, adding that one of such was limitation of state government ownership of banks, as part of measures to avoid huge withdrawal from the bank on the ground that they are owners. He stated that government withdrawal in the past has contributed to the failure of the nation's banks. Ataman noted that the step taken by the CBN was a process of dilution of ownership in the banking sector.
He also stated that media on the other hand has the role to play to encourage corporate governance and report those that do not comply in order to reduce and limit failure in the banking system.
However, in another development, Soludo said that the CBN is prepared to issue banking licence to any foreigner who has N25 billion and has satisfied the due diligence and other criteria and conditions. Although, foreigner would be welcome to operate banking business in the country, he said that apex bank would not be enthusiastic if they want to control any of the champions in the banking sector.
He said that apex bank would not be reluctant to allow foreign investors to take over existing banks, adding that it would be better for them to take banking licence and compete together with them in the local financial market.
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