ZAMBIAN BANKS CHALLENGED TO BE ACCOUNTABLE AND PROTECT THE INTERESTS OF THEIR DEPOSITORS TO AVOID MONETARY LOSS AND CONFIDENCE FROM THE CUSTOMERS THROUGH GOOD COOPERATE GOVERNANCE PROGRAM

BANK OF ZAMBIA GOVERNOR DR CALEB FUNDANGA HAS CHALLENGED BANKS IN THE COUNTRY TO BE ACCOUNTABLE AND PROTECT THE INTERESTS OF THEIR DEPOSITORS TO AVOID MONETARY LOSS AND CONFIDENCE FROM THE CUSTOMERS THROUGH GOOD COOPERATE GOVERNANCE PROGRAM.

SPEAKING TODAY AT THE INSTITUTE OF DIRECTORS BUSINESS LUNCHEON ON CORPORATE GOVERNANCE AND ITS IMPACT ON FINANCIAL INSTITUTIONS DR FUNDANGA POINTED OUT THAT POOR COOPERATE GOVERNANCE MAY CONTRIBUTE TO BANKS FAILURE, WHICH IN TURN CAN POSE SIGNIFICANT COSTS ON THE TREASURY AND CAN HAVE OTHER MACRO ECONOMIC EFFECTS LIKE CONTAGION RISKS.

DR FUNDANGA STRESSED THAT POOR COOPERATE GOVERNANCE CAN ALSO LEAD TO FINANCIAL MARKETS TO LOSE CONFIDENCE IN THE ABILITY OF THE BANKS TO PROPERLY MANAGE THEIR ASSETS AND LIABILITIES, INCLUDING CUSTOMER DEPOSITS AND THIS COULD IN TURN TRIGGER A RUN ON A BANK OR PRECIPITATE LIQUIDITY CRISIS.

HE STATED THAT IT IS FOR THIS REASON THAT MANAGEMENT OF BANKS HAVE TO PAY PARTICULAR ATTENTION TO THE INTEREST OF DEPOSITORS AND OTHER CREDITORS BECAUSE THE CONSEQUENCES OF MISMANAGING THEIR RISKS CAN THEREFORE BE VERY SEVERE NOT ONLY FOR THE INDIVIDUAL BANK ALSO FOR THE SYSTEM AS A WHOLE.

AND THE GOVERNOR CALLED ON THE BANKS TO PUT IN PLACE A SOUND PAYMENT SYSTEM AS IT PROVIDES THE MEANS BY WHICH VAST NUMBERS OF TRANSACTION ARE MADE EACH DAY.

HE NOTED THAT THE PAYMENT SYSTEM INVOLVES MANY DIFFERENT COMPONENTS, INCLUDING SYSTEM FOR SETTLING LARGE, INTER –BANK AND INTER-COOPERATE PAYMENT TRANSACTION AND SYSTEMS FOR HANDLING A NUMBER OF SMALLER TRANSACTIONS.

DR FUNDANGA SAID THAT A MAJOR OPERATIONAL FAILURE IN THE PAYMENT SYSTEM HAS THE POTENTIAL TO CAUSE SEVERE DISRUPTION TO THE FINANCIAL SYSTEM AND WIDER ECONOMY

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