Common to all the banks was the issue of non-performing loans to insiders. Directors and well-connected individuals had accessed loans without either declaring their interests (in the case of a company borrowing from the financial institution) or without following proper procedures in line with the banks’ credit policy and procedures. This the governor called weak corporate governance, which simply refers to how an organisation is run or managed.
The governor had put in place an incentive for its whistleblowing facility but we were later told that the central bank had not lived up to its promise on a number of tip offs which had been brought to its attention. Hence no more tip offs came its way. That will always be the case if any responsible authority doesn’t own up to its promises. As a consequence, the situation can only get worse.
The latest Renaissance Merchant Bank case could have been avoided had stronger corporate governance systems been put in place and rigorously enforced.
For starters, it is my humble submission that all board approved loans or other facilities must routinely be reported to the central bank henceforth. This will make the bank’s boards more accountable to the central bank. It should be unacceptable for the board members to plead that they didn’t know what was going on at the very same banks they purport to lead.
Furthermore, all banks must regularly report to the central bank via their boards all non- performing loans on their books and what strategies they would have put in place in order to recover such debts. This information would help the central bank in approving certain individuals who might be recommended to sit on certain company boards. It will also help the central bank decide on which banks to monitor closely.
