DALVINDER Singh, associate professor of law, University of Warwick, UK has said  the interplay between corporate governance and banks highlights the limits of corporate law and the need for robust bank requirements to ensure the interests of bank depositors are protected sufficiently and indeed the issue of financial stability in its risk management framework.
Singh said the traditional discourse of corporate governance and banking has tended to be tailored to almost any corporation without sufficient reflection of the public requirements namely safeguarding a whole set of wider stakeholder issues. 
As the Walker Review 2009, notes: “Corporate governance and regulation of a financial institution should be mutually reinforcing
“The importance of effective corporate governance is evident when the history of the international capital markets is reviewed, as it demonstrates that a weak system of governance in, for example, banks increases the likelihood of financial fraud or loss.”
According to Singh, “In an extreme scenario the fallout from these failures may have wider systemic consequences, with a significant risk of contagion in the banking system. Recently, billions of dollars have been used by governments recently to stabilise banks and the banking system to prevent the continuation of the recent financial crisis”.
Here in Nigeria, the Central Bank of Nigeria (CBN) sacked the managing directors of eight banks/chief executive and appointed new ones to run the banks after injecting N620 billion 2nd tier capital into the banks. The apex bank intervened in the bank due to largely lack of corporate governance among others.
Mr Umaru Ibrahim, acting managing director of the Nigerian Deposit Insurance Corporation (NDIC) said, “Given recent developments in the banking industry in the country, which led to the Central Bank of Nigeria’s (CBN) intervention we cannot but agree that more need to be done by way of enhancing supervision and boosting depositors’ confidence in order to address the identified problems of weak corporate governance, poor risk management, poor credit policy/ administration, insider abuse and greed amongst others.” This was the submission of Ibrahim, the acting managing director of the NDIC at a conference on “Banking Reforms” held in Lagos recently.

Direction and control
Singh said, “The idea of direction and control consists of numerous issues:
*The effectiveness of the board of directors, non-executive directors, shareholder involvement, external auditor independence, the robustness of the internal controls, the audit committee and the internal audit function to name just a few.
*The fundamental concern is that the processes of accountability are sensitive to the entrepreneurial spirit of a corporation and reduce its performance in terms of taking risks and profit maximisation.
*In this context tensions can clearly arise between shareholders expectations, depositors expectations and regulators expectations which need to be managed by directors and senior management.

5 controversial learnings on governance post recapitalization
Svein Harald Øygard of Mackinsey & Company, a speaker at the “Banking Reforms” conference listed these to include
•“Markets are there when you don’t need them, but not there when you need them”
•State steer in restructuring situations is very different from state steer in “steady-state” situations
•Bank restructuring is a very demanding process – Focused, professional management necessary
•Even with trusted boards and managers – The interest of the state as a provider of capital and the banks will not be aligned (cost, restructuring, focus)
•The state must use its provision of capital to exert influence to steer process

Tight governance required
Qygard said tight governance is required in the areas of “Disciplined corporate debt restructuring; Balance of Strength; Pride of “Old Fashioned Banking”; Cost reduction, restructuring, tight management processes; and Ensure business ethic.”

Access to credit is the priority
Qygard said banking crisis resolution is mainly about corporates /households’ access to credit; the combined meltdown of a banking system and an economy places borrowers at a large disadvantage; multiple mechanisms needed; reestablishing a robust, best-practice, domestic banking system – with additional requirements for good governance; bring in branches, credit facilities of international institutions; and Establish system for direct, international financing of large and mid-size corporates.

Next steps
Governance requires individuals at the helm that can understand the risks the bank is exposed to and need to manage those issues continuously. The reforms of bank regulation also need to ensure the bank resolution regime sufficiently protects bank depositors and financial stability. The role of non-executive directors of banks needs to be under separate regulatory scrutiny given the role they play in the governance regime. The regulator needs to ensure that those individuals understand the business they are overseeing and are able to ask the appropriate questions.