By The Citizen Reporter Media/news company Mwananchi Communications Limited
What you need to know:
Arusha. Retired Prime Minister Frederick Sumaye said at the weekend that the decision to limit the tenure of chief executives of commercial banks to ten years should not apply to the best-performing lenders.
But in a swift response, BoT governor Emmanuel Tutuba told The Citizen on Sunday that the limit imposed in 2021 had more benefits than disadvantages.
“Just as is the case with the top leadership of the country, the tenure limit for bank CEOs makes it possible for other people with new ideas to manage the institutions and take them to new levels of development,” he said in a telephone interview.
In its Banking and Financial Institutions (Corporate Governance) Regulations published in November 2021, BoT, among other objectives, set standards for corporate governance, processes, and structures for the banking industry.
The rules are meant to promote and maintain public confidence in banks and financial institutions and provide directors with guidance for the proper discharge of their responsibilities.
But impressed by the performance of the CRDB Bank Plc CEO and managing director, Mr Abdulmajid Nsekela, in the last few years, Mr Sumaye said the best performers should be exempt from the BoT regulations.
Speaking during CRDB Bank Plc’s 29th Annual General Meeting in Arusha, Mr Sumaye, who is a shareholder in the bank, proposed that the regulations be reviewed.
“I once told (former BoT governor) Prof (Florens) Luoga that a bank is a sensitive institution. Even a small problem can have a huge impact. For large banks like CRDB and NMB, if the CEO is a visionary individual, they should be allowed to fully implement their plans,” Mr Sumaye said amid applause.
He added that he would like to see Mr Nsekela pursue his vision at the helm of CRDB Bank Plc.
“I know there is a ten-year limit, but I think some banks should be allowed to give their leaders more time to implement their visions,” Mr Sumaye said.
The meeting was also attended by a representative of the BoT governor.
A report presented by chief financial officer Frederick Nshekanabo shows that the balance sheet of CRDB Bank and its subsidiaries reached Sh13.3 trillion in 2023, representing a growth of 121 percent since Mr Nsekela took over in 2018.
The report also shows significant growth in various performance indicators, with profit after tax increasing by about 560 percent to Sh422.8 billion last year.
As such, the dividend per share rose from only Sh5 in 2018 to Sh50 in 2023, representing a 900 percent increase.
But Mr Tutuba said Tanzania does not have a shortage of well-educated and performance-driven individuals who could bring good results similar to those Mr Sumaye is currently witnessing.
He said there was no reason for a person to doubt the sustainability of any financial institution, with or without the current chief executives and board members.
“Many of those currently excelling in banks are the result of the establishment of these regulations. Without them, perhaps they wouldn’t be in their positions. This system is good as it creates an environment for people to mold successors, knowing that their leadership time will eventually come to an end.”
The central bank head said the ideas presented were good but added that the current system was the most suitable at this time.
"Without tenure limits, incumbent executives could conspire to remain in office indefinitely because they have the power and influence to do so,” Mr Tutuba said.
In his remarks, Mr Sumaye, who served as Prime Minister from November 28, 1995, to December 30, 2005, under President Benjamin Mkapa, also emphasised the importance of embracing visionary leaders for the prosperity of banks and the national economy as a whole.
He praised CRDB Bank’s efforts to expand its services both within and outside Tanzania, noting that its entry into the Democratic Republic of Congo has opened up numerous economic opportunities for Tanzanian businesses.
Mr Sumaye, however, urged caution as the bank executed its expansion strategy.
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