Caleb M Fundanga: Corporate governance and its impact on financial institutions Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the Institute of Directors Business Luncheon on Corporate Governance and its Impact on Financial Institutions, Lusaka, 27 April 2011. *  *  *  The Institute of Directors National Vice President Mrs. Sue M. Mwaanza The Chairman Membership and Publicity Committee, Mr. Augustine C. Seyuba Directors and Chief Executive Officers Present Distinguished Invited Guests Members of the Press Ladies and Gentlemen I am honoured to be here today to share with you some thoughts on Corporate Governance and its Impact on Financial Institutions. I am certain that Corporate Governance is not a new topic to all of us in this room. It is obviously of fundamental importance to this audience, given that most of you are company directors. Corporate Governance is critical to the Bank of Zambia, in its capacity as supervisor and regulator of the banking system. Until fairly recently, corporate governance was not a topic that attracted much public attention. It was a topic reserved for discussion in the Board room or in academic environments. However, recent events, such as the Enron scandal and other corporate governance failures including events that led to the recent financial crisis, have made corporate governance a major topical issue. The recent events have highlighted the important role that corporate governance plays in a modern financial sector and the economy at large.

Under these parts:   Every bank or financial institution is expected to have a board of directors in which shall vest all the powers of management and control and which shall be responsible for the formulation of policies of the bank or financial institution (Section 30(1);    The Board of directors shall consist of not less than 5 members (Section 30(2);    Every financial service provider must have a Chief Executive Officer and Chief Financial Officer who shall not qualify to hold office unless it is shown that; they are fit and proper persons, above 21 years old, have not been convicted of a felony or offence involving dishonesty, are not mentally incompetent, have never been removed from office under the BFSA, have not managed a company that has gone into liquidation or entered into a composition with creditors (Section 31);    The majority of directors must be from outside the bank (Section 32(1);    Directors, Chief Executive Officers and Chief Financial Officers are expected to act honestly, in good faith and in the interest of the company whilst exercising due care, diligence and skill (Section 33);    A director is required to declare in writing to the board annually, the names and addresses of the director’s associates and full particulars of every material interest (Section 35);    A director who (a) negligently or with intent to deceive, makes any false or misleading statement or entry or omits any statement or entry that should be made in any book, account, report or statement of the financial service provider, or (b) obstructs or endeavours to obstruct (i) the proper performance by an auditor of the auditor’s duties in accordance with this provisions of this Act; or (ii) a lawful inspection of the service provider by a duly authorised inspector appointed by the Bank of Zambia, commits an offence and is liable on conviction to a fine or to imprisonment (Section 36).