By Obinna Chima, 10.14.2010 

 

Some financial experts have called for enhancement of the standards expected of persons for the position of director in the banking sector. The experts charged banks and other financial institutions in the country to ensure that only individuals with high level of integrity are appointed into their management Board, stressing that the poor quality of board appointments also contributed to the crisis in the Nigerian financial sector.

 

Partner and Head Risk and Compliance Services, KPMG Professional Services, Mr. Olumide Olayinka highlighted this in a paper titled, ‘Corporate Governance and Financial Market Stability,’ at a roundtable organised by the Risk Management Association of Nigeria (RIMAN), in Lagos yesterday. Olayinka bemoaned the process of appointing board members in financial institutions, saying that at times, the process is, “not on merit and shrouded in secrecy.”

 

He argued, “The Central Bank of Nigeria (CBN) came up with a policy on independent directors, but that is being abused. The board appointment process is key, because they are supposed to have oversight function over the management. I think it is one of the issues that led to the financial crisis.” The financial analyst insisted that the absence of robust corporate governance framework, lack of relevant experience amongst non-executive directors, poor succession planning and ineffective performance evaluation system for the board and management are some factors capable of pulling down any financial institution.He partly blamed the nation’s weak legal system for some of the anomalies in the financial system.

 

“When we talk about corporate governance, it is just ensuring that things are done properly. Anything that affects the banking sector, affects the fabric of the society. The root cause of our financial crisis had nothing to do with the global economic recession. Unfortunately, we had issues of greed and reckless disbursement of loans,” he argued.

 

While he called for improved regulatory framework, Olayinka acknowledged steps taken by the CBN to enthrone corporate governance in the system. He added, “A bank is more likely to succeed if it removes greed and if it has a Chairman that has a financial industry experience and a track record.” On his part, the President, RIMAN, Mr. Emmanuel Abolo, advised financial institutions to continue to lay emphasis on risk management and corporate governance, adding that the various CBN reform policies are geared towards placing operators in the right direction.

 

Earlier, the Deputy Director, Risk Management Department of the CBN, Mr. Adebola Olawoyin, urged banks to embrace corporate governance and risk management. He stated that the reforms would be beneficial to all stakeholders in the long run, just as he called on operators to be equipped technically.

 

Source:ThisDay