A new corporate governance code has empowered the board of directors of financial institutions to set limits of authority for large transactions and give approval for such transactions.
Acting CBN Governor, Sarah Alade
The new code of corporate governance for banks and discount houses, which the Central Bank of Nigeria (CBN) released on its website on May 20, did not provide exceptions.
Members of the board, limited to a minimum of five and a maximum of 20, are severally and jointly liable for the activities of the bank and ensure adherence to the code of conduct for bank directors.
Shareholders have the right to obtain relevant information from the bank on a timely and regular basis and participate actively and vote in general meetings.
In addition to the traditional means of communication, banks are to have a website and communicate with shareholders through the website.
Such information should include major developments in the bank, risk management practices, executive compensation, local and offshore branch expansion, establishment of investment in subsidiaries and associates, board and top management appointments, sustainability initiatives and practices.
An equity holding of 5 per cent and above by any investor shall be subject to CBN’s prior approval, and where such shares are acquired through the capital market, the bank should apply for a no objection letter from the CBN immediately after the acquisition.
CBN defined corporate governance as rules, processes, or laws by which institutions are operated, regulated and governed.
It was developed to promote a transparent and efficient banking system that will engender the rule of law and encourage division of responsibilities in a professional and objective manner.
The implementation of the earlier code applied since 2005 was marred by ambiguity and/or conflict with the Companies and Allied Matters Act (CAMA) 1990.
The need to update the code and align it with contemporary developments and international best practices became apparent in 2009 after a joint CBN/NDIC (Nigeria Deposit Insurance Corporation) examination revealed, among others, poor corporate governance practices.
That joint audit led to the removal of the managing directors of five banks and the nationalisation of three of the banks.