The Central Bank of Nigeria (CBN) recently announced maximum of a 10-year tenure for commercial bank CEOs. This is generating controversy in the banking industry. As a seasoned banker, what is your view on this?
This regulation is a step in the right direction. This question of tenure should have been adopted a long time ago. In Nigeria today, there is a chief executive who has spent over 16 years running a bank. I was a chief executive of financial institutions.
Any chief executive who has spent eight years couldn’t add anything new to the institution because he has exhausted all his ideas. To me, 10 years is even two much; let us make it four years to be renewed once. No matter how good you are, in eight years, you should have delivered whatever ideas you have in your head to the bank. Then you should leave the place for others to come in with fresher ideas.
In addition to that, I think Malam Sanusi Lamido Sanusi has gone only half way. There are other related matters which he has to do to make this reform fully successful.
First of all, we should go back to the ownership of the bank. This is because long tenure, like what you have in Zenith Bank started because of too much family ownership. Family ownership is the factor that really encouraged long stay of chief executives.
Let us take the case of Oceanic Bank. God knows how long Cecilia Ibru would have stayed there because it is a kind of an Ibru family bank. She could have stayed as long as she wanted. But that is not good for the economy.
Family ownership of banks is out of fashion. It started in Europe and later in America. But it is no longer relevant in the present day economy of the world. So, we should, as much as possible, avoid family-owned banks. They should be publicly-owned.
Now, if there is any family that wants to establish a bank, no one should stop them. But they should not take deposits. They should use the family’s wealth to establish their bank and use their money to give out loans. If the money is liquidated they got only themselves to blame.
What we don’t understand is that there are two types of banks: a deposit-taking bank and non deposit-taking bank. A deposit-taking bank simply means if you register and get licence for your bank, you will, at the same time apply to be a deposit-taking institution. That is, you have two licences.
A non deposit-taking bank is more suitable for family ownership. You get a licence to establish a bank. After that, nobody would worry about you. You provide the capital base and the bank is 100 percent owned by your family.
And then the loan-able fund which you are going to lend to potential borrowers is your own. If you get your money back after lending it with interest, good luck to you; if it is liquidated, then that is your hard luck. Nobody would worry you about whom you appoint as managing director, chairman and so on. That is family ownership. You are not even quoted on the stock exchange.
The contribution of that type of bank in the present world is very limited. But, if in Nigeria we have to insist on family ownership of banks, then we have to allow that. But as long as you are taking deposits from the public, then you must abide by the rules set up by the government and implemented by the CBN.
I still believe that there are a number of banks that need to be restructured in terms of ownership. Intercontinental and Oceanic banks’ ownership structure for example, should really be restructured.
The highest stake a single family can acquire shouldn’t be more than 21 percent. It should be a core investor and then the rest goes to the public. I believe there are about three to four banks today that are family-owned. I believe that Sanusi should really do something about it in addition to this tenure system.
There are fears that removing these bank executives who have substantial stakes in the banks may likely erode the confidence of customers.
Let us go back still to what I said. Why should the Chairman, managing director, executive directors, general managers and other top hierarchy of the banks have domineering ownership of the banks? They shouldn’t!
A person holding only one or three percent of the capital base of the bank, if he is capable of running the bank, should be appointed as managing director. No problem about that.
The same thing goes for the chairman and executive directors. They may not necessarily owe large chunk of the bank’s shares but they should be reputed as capable people. This is because the moment they are appointed managing directors and other top officials of the bank, they are employees of the bank.
Of course, it is not advisable to appoint someone who doesn’t own even one percent as managing director of a bank. There should be a little bit of ownership.
Are you saying that the removal of the bank chief executives would not affect the banking industry?
Yes, it will impact on the sector positively. It makes no difference. But those who are removed and are currently having major shares in the banks should be encouraged to download their shares and do something else with their money.
This is because if you leave them, they still own the major shares and there is this fear that they may still be dictating the tune. They may render the managing directors and other top officials of the banks somewhat incapacitated. They may not be able to take independent decisions in the best interest of the banks.
Take Jim Ovia of Zenith Bank for instance, who may own up to 40 percent of the bank; he should be encouraged to download so that he might not be seen controlling the bank from outside even after his exit. But nobody should stop Ovia from owning substantive shares; but not to the extent of dictating what should be done.
Sanusi has started on the right footing. It is therefore, extremely important for him to continue in the same direction despite the ongoing campaign of calumny and blackmail by some people. His priority should be to bequeath to the country a sound and viable banking industry.
That is why, we, people from outside believe that there are other things that need to be done apart from tenure system. Like I said, what really breeds this question of tenure is that some people have entrenched themselves for a long time because they own the banks. This should be discouraged.
I wish he did this comprehensively all together rather than piecemeal. But it is still better.
Are you not disturbed by the massive sack of bank staff courtesy of his current reforms?
We have come to a situation where we have to make a choice. That is, are we going to have an efficient and professionally- driven banks, particularly in this digital age? Or are we going to have banks which are more or less concentrating on providing only employment and in so doing, over loading themselves?
I believe the former should be our choice. I believe that Oceanic Bank, to be frank with you, as it is now, can run with half of the manpower it has at the moment. This is because the previous chief executive nearly rocked the bank.
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