New CBN rules necessary for banking sector growth– Experts

<p>Stakeholders in the financial sector, on Wednesday, said the new corporate governance rules issued by the Central Bank of Nigeria were fitting responses to the recent developments in the banking sector.</p>, <p>They disclosed this in separate interviews with The PUNCH.</p>, <p>The CBN recently introduced new guidelines in a circular to all commercial, merchant, non-interest and payment service banks, and financial holding companies, titled ‘Corporate Governance Guidelines’, which was signed by the Director, Financial Policy and Regulation Department, Chibuzo Efobi.</p>, <p>In the guidelines, the CBN extended the tenure of the managing directors of banks to 12 years, prohibited having more than two members of an extended family on the board of a bank and stated that the acquisition of up to five per cent stake in a financial holding company would require the central bank’s approval.</p>, <p>Commenting on this, Prof Olawale Ajai of the Lagos Business School, said though the CBN’s new guidelines seemed adhoc, they were timely.</p>, <p>“Although the guidelines appear adhoc and piecemeal, they are fitting responses to challenges and developments in the industry. The fact that they are soft laws suggest that they do not represent the final position and are meant to side-step any contention of colourable attempt to override BOFIA 2020,” he said.</p>, <p>He pointed out that one of the objectives of the banking consolidation of the CBN was to terminate what he described as “papa and mama” banks, or closely held family bank businesses.</p>, <p>“It did not seek to and could not eliminate closely held controlling shareholding or groups, a natural possible outcome of market consolidation. Yet, BOFIA 2020 has provisions to minimise the corporate governance risks from such developments,” he stated.</p>, <p>The professor, however, urged the regulator not to stifle or micromanage shareholders’ democracy and legitimate market capitalism.</p>, <p>“It (regulator) must always have the latitude to check anticompetitive practices, m