Oversight of Corporate Governance in State Owned Banks and Insurances: an Assessment of Competing Legal and Institutional Mandates
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Date
2022-12
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Addis Ababa University
Abstract
Governments participate in a variety of economic sectors for a number of objectives, including
providing public services, fostering employment opportunities and raising revenue. The financial
sector, particularly banks and insurance, is the most important one among the economic sectors.
The same is true of the Ethiopian government, which owns very giant banks and insurers. One of
the pillars of any successful company, whether it is public or private, is corporate governance.
Corporate governance can either be self-regulatory or through intervention of government by a
government regulatory/supervisory/ entity. Particularly, the financial sector requires stringent
regulation and oversight. The NBE is authorized to act as the country’s central bank, as well as
a regulator and supervisor of its financial institutions. Simultaneously, PEHA is also given the
authority to supervise state enterprises, which include government banks and insurance. This has
been creating practical problems.
The study aims at investigation how regulation and supervision of corporate governance of state
owned banks and insurers look like. To attain this, the study employs interviews, letters
examinations, analysis of legal instruments and literature reviews. The thesis finds that there
are gaps in the law and serious mandate overlap between the two supervisory authorities, NBE
and PEHA. Further, the thesis proved happening of practical problems as a result of these
mandate overlaps.
Accordingly, the thesis argues basing OECD principle of corporate governance that the power
of supervisory authority shall be clearly demarcated. Furthermore, the regulator and
supervisory authority shall be independent. Hence, the PEHA shall only act as shareholder to
safeguard the interest of state and NBE shall regulate and give approvals when the law requires
approval like other private banks and insurances.