Call to BoT: Reverse bank CEOs’ tenure cap

TANZANIA: STAKEHOLDERS have advised the Bank of Tanzania (BoT) to revise the regulation which puts a limit of ten years for the heads of banks to stay at the helm of a head financial institution.

The stakeholders are saying that the tenure limit poses a danger for some banks to collapse in the future since ten years is little time for chief executive officers to fully executive the institutions’ business plans accordingly, while hindering them from unveiling their full potential.

Some stakeholders including financial analysts are viewing this regulation to be impacting the lenders from excelling since many banks have registered positive steps after some time and the new head may reverse the trend thus, calling the BoT to revise it.

At the beginning of 2020s the central bank introduced a regulation that placed a 10-year limit on the tenure of CEOs, saying the aim is to promote and maintain public confidence in banks and financial institutions by improving corporate governance.

However, some bank shareholders and market analysts have now come up with different opinions less than five years since the regulation was introduced, saying the law seems to please the central bank’s interest than the interest of owners.

Former Prime Minister Mr Fredrick Sumaye said that for instance, the CEOs of the two leading banksCRDB and NMB- should be given more time to operate since they play an important role in the country’s economy.

“I know that there is such a regulation that puts a tenure of office for bank CEOs’. “It is the time for BoT to revise the regulation to allow these leaders to stay longer and be able to implement their visions,” said Mr Sumaye when airing his view during the CRDB 29th Annual General Meeting (AGM) in Arusha over the weekend amid heavy clapping from his fellow shareholders.

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The ex-PM’s view was supported by a cross-section of some stockbrokers who said Mr Sumaye had a point since the heads of banks serve the interest of shareholders. Alpha Capital Head of Research and Financial Analytics Imani Muhingo said limiting their leadership tenures is not healthy for a bank so long as the CEO delivers.

“Most of the large corporations in the country have taken more than ten years to become mega companies. “I believe private businesses should be allowed to decide the fate of their leadership, as long as the leaders are properly vetted, encompass integrity and sufficient qualifications,” Mr Muhingo told Daily News on Sunday.

However, the longest serving tenure, to a larger extent, becomes positive for a bank to generate profits based on its business strategy, which is normally divided into five years.

The best CEO who delivers according to the plan should be retained and the one who fails should be fired. Based on this, the tenure of a CEO should only be guaranteed on success and not failure. Dr Hilderbrand Shayo, economist-cum-investment banker said the CEO’s tenure should be based on quality and efficiency one demonstrates to maximise profit.

“I think it is not okay to limit the CEO’s term to ten years since the time is not enough to turn around or salvage a bank from sinking. “This is enough time to settle in and understand the industry and the particular institution’s history…,” Dr Shayo said.

Dr Charles Kimei, a former CRDB Managing Director took 20 years to turn around the bank from lossmaking to one of the largest lenders in the country. To date, CRDB is the largest bank in terms of balance sheet.

Mr Sabasaba Moshingi, former CEO of Tanzania Commercial Bank (TCB) spearheaded the reforms of the lender from TPB Bank and created one of the competitive institutions with over 1.0tri/- assets—the group of elites.

It took him 12 years to accomplish the mission. During his tenor at TCB he transformed the bank from a mid-size bank with total assets of 121bn/- to 1.4tri/-, earning a slot in the top ten banks in the country.

Mr Moshingi was recently appointed a Managing Director of DCB Commercial Bank. Additionally, James Mwangi, a Kenyan banker, who is an Equity Bank CEO took some 25 years to salvage the bank from a brink of bankruptcy to one of the largest banks in East and Central Africa with subsidiaries in Tanzania, Uganda, South Sudan, Rwanda, Burundi and DR Congo.

Mr Mwangi, the father of agency banking, joined Equity in 1993 when it was struggling and had already been declared technically insolvent, making losses of 99.4m/- every year. Co-operative Bank of Kenya Managing Director Dr Gideon Muriuki was appointed at the position in 2001 and presided over the lender’s turnaround from a massive loss position of Kshs 2.3 billion in 2000 to a profit before tax of Kshs 22.6 billion in 2021.

Last year, both Equity and Co-operative Bank entered the top ten list of largest banks in East Africa in assets and capital, and their CEOs headed the lenders for over 20 years.

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