Access Bank leads other banks in financial transparency

Access Bank and Stanbic IBTC have emerged as the banks with the best risk management and corporate governance disclosures in their published 2010 annual reports. The two banks emerged from a rigorous evaluation of the adequacy of their risk management and corporate governance disclosures in the published annual reports of listed Nigerian banks.

The analysis looks beyond generic or fiduciary disclosures of corporate governance and risk management practices within banks, to scrutinise practical and effective disclosures which show how corporate governance and risk management practices are actually incorporated in the day to day practices within the bank.

Tagged the Nigerian Banks Financial Transparency report, it is a joint project of BusinessDay and Source Capital Research, with support of the Institute of Chartered Accountants of Nigeria (ICAN) and the Chartered Institute of Bankers Nigeria (CIBN).

This year’s ranking saw the emergence of Stanbic IBTC Bank with the best corporate governance disclosure in their annual reports.

Diamond Bank followed closely while Access Bank ranked third in corporate governance disclosure.

However, when banks are ranked in terms of risk management disclosure in their published annual reports, Access ranked first, followed by Stanbic IBTC, while Ecobank ranked third with FCMB ranking fourth.

The Financial Transparency ranking also combines the scores of banks in their corporate governance disclosure and risk management disclosure, to get a single figure called the Financial Transparency Index (FTI). Each bank is allocated an FTI score, which is a measure of the strength of a bank’s overall risk management and corporate governance disclosure in their annual reports.

Access Bank had the highest FTI score of 4.64 points in the 2011 ranking. Stanbic IBTC Bank ranked a close second with an FTI score of 4.60 while FCMB ranked third with an FTI score of 3.37.

Ecobank ranked fourth with an FTI score of 2.98 while GTBank ranked fifth with an FTI score of 2.88. The FTI scores are scaled to a maximum of 10 points.

The 2011 Nigerian Banks Financial Transparency Report shows that the common items missing in most banks corporate governance disclosures in their 2010 annual reports, include non-disclosure of current and past directorships held by board members, non-disclosure of the succession planning procedure in place and criteria and process used in the selection of the members of the board, non-disclosure of exact remuneration of top paid executives, as well as the performance measures of the bank’s executive directors, and the non-disclosure of the financial knowledge or financial competence of the bank’s audit committee chairman and members. Most banks also failed to give adequate disclosure about their whistle blowing policy.

On risk management disclosure, most banks failed to disclose in their published annual reports, a detailed description showing the effective independence of the bank’s internal control function in the annual report, description of the bank’s compensation policy, especially as it affects those involved in trading and its alignment with the bank’s risk management culture, non-detailed description of the management of risks in the bank’s trading books, non-disclosure of the bank’s credit exposure as a percentage of capital funds and as a percentage of total assets, in respect of the largest single borrower or the largest borrower group, as well as lack of detailed discussion of the bank’s market risks, in its non-trading books.

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