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[January 20, 2014]
Ecobank Under Pressure Over Corporate Governance
(AllAfrica Via Acquire Media NewsEdge) Ecobank Transnational Incorporated (ETI) response to criticism of its corporate governance by the Securities and Exchange Commission (SEC) will be seen as a test case for banks in Africa, a report by Reuters has stated.
Africa is closely being watched by potential investors tracking the region's fast growth and heady returns.
Growth in sub-Saharan Africa is rising and had been projected at six percent this year according to International Monetary Fund (IMF) figures.
Ecobank , often touted as a pan-African banking success story, is one of the biggest financial institutions in the region, outside of South African giants such as Standard Bank and FirstRand.
But the bank is now under pressure to show it would be able to drive reform after SEC criticised weaknesses in its board's ability to manage its own activities, monitor management, evaluate performance and oversee ethical behaviour.
"Our view is not positive. It is quite disappointing that this is happening in such a big listed stock," Reuters quoted said Portfolio Manager at Stanlib Africa Equity Fund, Thabo Ncalo, to have said.
Ncalo added: "I would expect existing shareholders to be up in arms calling for reform." SEC began its probe into Ecobank after its former Finance Director, Laurence do Rego, who the bank had suspended, told regulators she was pressured to misstate the 2012 financial results. The bank however denied her allegations.
According to Reuters, two senior African financial officials, who asked not to be identified, welcomed the SEC's move as a sign that regulators are flexing their muscles at a time when central bankers are on a drive to tighten regulation of the fast-growing banking industry on the continent.
"We think this is very positive because it shows that the SEC is doing its job. Ecobank has responded in a very positive manner," a Johannesburg-based fund manager for Renaissance Asset Management, Sven Richter said. The governance allegations, however, could potentially impact Fitch's credit rating on the bank, the agency said.
"In the event that recent allegations of weak corporate governance are proven and materially alter the risk profile of the group, this could lead to a review of the ratings," a Director at Fitch, Mahin Dissanayake said.
Copyright This Day. Distributed by AllAfrica Global Media (allAfrica.com).
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