FITC proffers solution to insider abuse

Following the investigation of some cases of insider abuse by members of the board of directors of commercial banks by the Central Bank of Nigeria, the Financial Institutions Training Centre has called for stiffer penalties for the menace in the banking sector.
Managing Director, FITC, Dr. Lucy Newman, said at the 2017 edition of the CBN-FITC Continuous Education Programme in Lagos that one of the factors responsible for the increasing rate of insider abuse was the culture of lenient penalties for culprits.
She said, “In most cases, the culprits compare the penalties with what they stand to lose if they miss the deal. The menace would be tamed if the Federal Government amends and stiffens the punishment for defaulters.
“A lot of bankers factor the penalties for insider abuse in the cost of doing business before committing the crime, but if it is increased, they would avoid it,” she
said.
Meanwhile, the CBN Governor, Mr. Godwin Emefiele, has said that the apex bank will not fold its arms and allow owners of some banks to impose incompetent management or board to oversee the affairs of the banks, as the apex bank will go tough on errant board members of banks and other financial institutions.
According to him, the recent economic recession had revealed corporate governance weaknesses in the financial sector.
He listed some of the governance weaknesses as: unreported losses, huge exit packages for directors, insider non-performing loans, over-domineering executive management, and contravention of regulatory/prudential guidelines.
The CBN boss also said, “We are going to get tough because it is a dynamic environment, and we still see cases of some insiders’ abuses. The central bank is currently looking at a few cases, and we will continue to take drastic action against those insiders.
“The recent economic recession has shown that the financial industry still harbours weaknesses in governance, exemplified by instances of unclear rendition of returns, and corporate governance abuses such as unreported losses, huge exit packages for directors, insider non-performing loans, over-domineering executive management, contravention of regulatory/prudential guidelines, lending limits, poorly appraised credits, and weakening of shareholders’ funds, among others. Overall, the huge challenge of ‘key-man’ risk abound in our industry.”
Emefiele said depositors were important stakeholders in the banks than shareholders and that there was the need to ensure that cases of insider abuse by executive management and board members were stopped.
He added, “Insiders or core shareholders of banks are people who have been used by God to set up those institutions. They truly do not own those institutions. Yes, even though they are important, the more important stakeholders in a bank are the depositors.
“And there is the need for us to ensure that we all protect them. And that is why I’ve had cause to say at this programme that independent directors must remain independent and perform their roles and responsibilities, no matter
how tough. They must be able to look at insiders, who are shareholders of those institutions and tell them what is true and what is not right.”