New Banking And Financial Institutions Regulation On Corporate Governance

• Published date: 09 February 2022
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Financial Services, Compliance, Directors and Officers, Corporate Governance, Shareholders
• Law Firm: Shikana Law Group
• Author: Shikana Law Group

On this legal update, we provide an overview of the new regulation, The Banking and Financial Institutions (Corporate Governance) Regulations, Government Notice No. 767 of 2021. The regulation shall apply to all banks and financial institutions in Tanzania, and it aims at establishing standards for corporate governance process and the structures in all banks and financial institutions.

In summary the Regulation introduces Board of Directors as the governing body of a bank or financial institution and set out the composition of the Board, qualifications and criteria for selection of board members, responsibilities and functions of the board and the senior management, liabilities of the directors and new sanctions for non-compliance that the Bank of Tanzania ("BOT") may impose on banks or financial institutions.

There are 9 Parts to the Regulation, each Part addresses a topic relating to the corporate structure of banks and financial institutions and the Board of Directors.

PART I

Part I of the Regulation provides for the citation, definition of terms and objectives of the regulation. Regulation 3 provides that the Regulation aims to establish standards for corporate governance processes and structures, provide guidance to directors for proper discharge of their fiduciary duties and promote public confidence in banks and financial institutions.

PART II

This Part provides for the establishment of board of directors, it's composition, tenure of office, selection criteria of members and persons not qualified to be appointed as directors in a bank or financial institution.

Establishment of Board of Directors and its composition

Regulation 4 provides for the establishment of Board of Directors which shall be the governing body of the bank or financial institution. The Board shall be composed of five members, two-thirds of whom shall be non-executive. It is also required that at least two members of the Board must be Tanzanians. Members of the Board and Chief Executive Officers shall hold office for a period of ten years. In circumstances where there is a merger or acquisition, the period of tenure of members shall be counted pre and post the merger.

Restriction on Board Members to serve simultaneously in more than one bank

Regulation 5(3) sets out the restriction of a person to simultaneously serve as a Board member or any executive capacity in more than one bank or financial institution in Tanzania except with prior written approval from Bank of Tanzania (BOT).

Committees formed by the Board

The Board has a mandate to form an Audit committee, Credit committee, Remuneration committee and any other committee to carry out oversight role of the Board and other responsibilities.

Restricted Persons to be Directors of a Bank/Financial Institutions

Members of the National Assembly or House of Representatives or councilor of local government authority shall not...