Access Bank Headquarters
By Goddy Egene
Access Bank Plc has come tops in the Financial Transparency Index (FTI) based on combined risk management and corporate governance disclosures in their financial reports for the year ended December 2010.
The financial transparency study was conducted on the 2010 financial reports of banks quoted on the Nigerian Stock Exchange by Source Capital Research in collaboration with BusinessDay Media.
The report, which shows how much information the banks provide to the public in both risk management and corporate governance practices has been released and it showed that Stanbic IBTC Bank came second behind Access Bank.
Fourteen listed banks were analysed by the research team at Source Capital. According to the report, when a combination of the overall level of corporate governance and risk management disclosure by the banks was analysed and ranked, Access Bank, Stanbic IBTC Bank, First City Monument Bank Plc, Ecobank Bank Plc and Guaranty Trust Bank were the top five.
Access Bank scored 4.64 points out of 5.0; Stanbic IBTC (4.5); First City Monument Bank (3.37), Ecobank (2.98), and Guaranty Trust Bank (2.86).
They were followed by Diamond Bank (2.75), Zenith Bank (2.45), Fidelity Bank (2.31); Skye Bank (2.29); Wema Bank (2.03); First Bank of Nigeria(1.94); Sterling Bank (1.91); Unity Bank (1.07); United Bank for Africa Plc (1.01).
Specifically, in the areas of risk management disclosures, Access Bank was the most transparent. It was followed by Stanbic IBTC, Ecobank, FCMB, and GTBank in that order, while Sterling bank, Skye Bank, Unity Bank, FBN and UBA, provided the least risk management disclosures in their 2010 financial reports.
In terms of corporate governance disclosure alone, Stanbic IBTC came out tops and was followed by Diamond Bank, Access Bank, FBN, and GTB, in that order. Wema Bank, Fidelity, Sterling, Ecobank and Unity Bank were in the bottom of the pack in terms of information disclosed that are related to corporate governance.
According to the report, some of the issues looked at by the research team include: how much disclosure is given by the banks in the areas of remuneration for executive directors; compensation policy for proprietary traders and how it may undermine banks risk management checks and balances; individual whistle blowing policy; interest rate risk management,; concentration risk on trading books; and the independence of the internal control function.
However, while Access Bank topped the index, the bank was found not to have disclosed information such as the compensation policy of the bank as regards its proprietary traders, the level of training its directors have on risk management, concentration risk, and trading portfolio Value at Risk (VAR).
Significantly some banks such as UBA offered no disclosure whatsoever in terms of risk management in their 2010 annual report.
But Stanbic IBTC disclosed a lot of information in the area of corporate governance, except with regards to whistle blowing policy or the level of compliance with International Financial Reporting Standards (IFRS) standards.
Risk management and corporate governance disclosure is becoming more relevant to investors and regulators of Nigerian banks after a period characterised by weak corporate governance, lax attitude in risk management, excessive credit growth and a universal banking model, which led to regulatory arbitrage.