QUESTION.

Kadosh Bank Limited is a successful bank in Tanzania. It has a turnover of more than $1 million
annually. The bank proud itself as one of the most successful banks in the country with more
than 2,000 customers in the country and 200 branches nationwide. Its board of director construe
of Mr. Abdulmalick who a founder and major shareholder with is more than 10% of shares
outstanding. Further, other shareholders are PPF holding 7%, Miss Daniellah 5% and the rest
78% of shares outstanding. Recently Bank of Tanzania has requested them to transform to adhere
to Bank of Tanzania guidelines. They are confused since such model has been working
successfully for many years (est. 22 years since establishment). Now as an analyst appointed by
the Bank of Tanzania you are asked to guide them to: - Required:

a) Explain the five (5) function of board of directors for Kadosh Bank Limited?

The five primary functions of the board of directors for Kadosh Bank Limited are:

Strategy and oversight. The board is responsible for setting the overall strategic direction of the
bank and ensuring that management is effectively executing the strategy. This includes
approving major strategic decisions, such as mergers and acquisitions, new product launches,
and expansion plans.

Risk management. The board is responsible for overseeing the bank's risk management
framework and ensuring that the bank is adequately managing its financial, operational, and
reputational risks. This includes reviewing and approving risk management policies and
procedures, monitoring risk exposures, and ensuring that the bank has sufficient capital to cover
its risks.

Governance and compliance. The board is responsible for ensuring that the bank is governed in
accordance with all applicable laws and regulations. This includes establishing and maintaining
appropriate corporate governance structures, ensuring that the bank is compliant with all
regulatory requirements, and conducting regular reviews of the bank's compliance program.

Board composition and succession planning. The board is responsible for ensuring that it is
composed of appropriately qualified and experienced individuals. This includes identifying and
recruiting new board members, providing board members with ongoing training and
development opportunities, and developing a succession plan for replacing board members as
they retire or otherwise leave the board.
Management accountability. The board is responsible for holding management accountable for
its performance. This includes reviewing and approving management's performance reports,
conducting regular performance evaluations, and taking appropriate action if management fails
to meet expectations.

In addition to these five main functions, the board of directors may also have other specific
responsibilities depending on the size, structure, and industry of the company. For example, the
board may be responsible for approving mergers and acquisitions, or for overseeing the
company's environmental and social responsibility programs.
b) Explain the five (5) role of the Chief Executive officer towards the company?

The five primary roles of the Chief Executive Officer (CEO) towards Kadosh Bank Limited are:

Strategic leadership. The CEO is responsible for providing strategic leadership to the bank and
ensuring that the bank is implementing its strategic plan effectively. This includes developing
and communicating the bank's vision and mission, setting strategic goals and objectives, and
making decisions that will enable the bank to achieve its long-term goals.

Operational management. The CEO is responsible for overseeing the day-to-day operations of
the bank and ensuring that the bank is operating efficiently and effectively. This includes
managing the bank's resources, such as its people, capital, and technology, and ensuring that the
bank is meeting its customer needs.

Corporate Governance. The CEO plays a crucial role in maintaining good corporate
governance practices within the company. They ensure compliance with laws, regulations, and
ethical standards. The CEO promotes transparency, accountability, and responsible decision-
making throughout the organization.

External relationships. The CEO is responsible for representing the bank to its external
stakeholders, such as customers, investors, and regulators. This includes building and
maintaining relationships with key stakeholders, communicating the bank's strategy and
performance, and responding to stakeholder concerns.

Financial stewardship. The CEO is responsible for ensuring that the bank is financially sound
and that it is maximizing shareholder value. This includes managing the bank's financial risks,
ensuring that the bank is meeting its financial obligations, and making decisions that will
enhance the bank's long-term financial performance.

In conclusion, the board of directors and the CEO are both critical to the success of Kadosh
Bank Limited. The board provides strategic leadership and oversight, while the CEO manages
the day-to-day operations and implements the board's vision. By working together effectively,
the board and the CEO can help Kadosh Bank Limited continue to be a successful and respected
institution in Tanzania.
c) Explain the meaning and importance of nomination and audit committee and its composition
in accordance with Bank of Tanzania guidelines?

The nomination and audit committee (NAC) is a specialized committee of the board of directors
that is responsible for overseeing the bank's nomination and audit processes. The NAC plays a
critical role in ensuring that the bank has a strong corporate governance framework and that it is
complying with all applicable laws and regulations.

Nomination Committee. The nomination committee is responsible for identifying and

recommending suitable candidates for board membership. It ensures that the board comprises
individuals with diverse skills, expertise, and experience. The committee assesses the
qualifications, independence, and integrity of potential board members and recommends their
appointment or reappointment.

Audit Committee. The audit committee oversees the financial reporting process, internal
controls, and audit activities of the bank. It ensures the accuracy and reliability of financial
statements, compliance with accounting standards and regulatory requirements, and the
effectiveness of internal control systems. The committee also appoints and oversees the external
auditors, reviews audit findings, and monitors the implementation of corrective actions.

The composition of the nomination and audit committee should be in line with the Bank of
Tanzania guidelines. Typically, the committees should consist of non-executive directors who are
independent of management and have relevant expertise. The guidelines may specify the
minimum number of committee members and their qualifications. The committees should have a
chairperson who is an independent director and possesses the necessary skills and experience.

The nomination and audit committee (NAC) is a specialized committee of the board of directors
that plays a critical role in ensuring the financial health and stability of a bank or financial
institution. The NAC's primary responsibilities include:

 Oversight of the financial reporting process: The NAC reviews the bank's financial
statements and ensures that they are accurate and fairly presented.
 Oversight of the internal control system: The NAC assesses the effectiveness of the
bank's internal controls and recommends improvements as needed.
 Oversight of the audit process: The NAC selects the bank's external auditor and
oversees the auditor's engagement.
 Oversight of compliance with laws and regulations: The NAC ensures that the bank is
complying with all applicable laws and regulations.

In addition to these specific responsibilities, the NAC also plays a broader role in promoting
good governance and transparency within the bank. The NAC's work helps to ensure that the
bank is managed in a sound and responsible manner, which is essential for protecting the
interests of depositors, shareholders, and the broader public.

Composition

The composition of the NAC is typically as follows:

 A majority of non-executive directors: This ensures that the NAC is independent of the
bank's management.
 At least two independent members with accounting, auditing, or related financial
management experience: This ensures that the NAC has the expertise necessary to carry
out its responsibilities effectively.

Bank of Tanzania Guidelines.

The Bank of Tanzania (BOT) has issued guidelines for the composition and operation of NACs
in Tanzania. These guidelines are based on international best practices and are designed to
ensure that NACs are effective in their oversight role.

The BOT guidelines specify that the NAC should be composed of at least three non-executive
directors, two of whom must be independent members with accounting, auditing, or related
financial management experience. The NAC should meet at least four times per year, and its
minutes should be submitted to the full board of directors for review.

The BOT guidelines also specify that the NAC should have a clear mandate and that it should be
given the resources and authority necessary to carry out its responsibilities effectively. The NAC
should have direct access to the bank's management and to the external auditor.

The nomination and audit committee is an essential component of good governance

in banks and financial institutions. The NAC plays a critical role in ensuring the financial health
and stability of these institutions, and its composition and operation are governed by strict
guidelines issued by the Bank of Tanzania.

d) The regulatory process for converting a company into a bank may involve the following steps:
Preparing the Application. The company needs to prepare a comprehensive application that
includes details about its business plan, financial projections, governance structure, risk
management framework, and compliance with regulatory requirements. The application should
also include information about the shareholders, directors, and key executives of the proposed
bank.

Submission of Application. The company submits the application to the regulatory authority, in
this case, the Bank of Tanzania. The application is typically accompanied by the required
supporting documents, such as financial statements, legal and incorporation documents, and
background checks on key individuals.

Evaluation and Review. The regulatory authority evaluates the application and conducts a
thorough review of the company's proposed bank operations. This may involve assessing the
company's financial stability, risk management capabilities, compliance with regulatory
guidelines, and suitability of the shareholders, directors, and executives.

Capital Requirements. The regulatory authority may specify minimum capital requirements for
the proposed bank. The company must demonstrate that it has sufficient capital to meet these
requirements and ensure the bank's financial stability.

Licensing and Approval. If the regulatory authority is satisfied with the company's application
and compliance with regulatory requirements, it grants the necessary licenses and approvals to
convert the company into a bank. This includes obtaining a banking license and any other
permits or authorizations required by the regulatory authority.

Transition and Implementation. Once the necessary licenses are obtained, the company can
proceed with the transition process. This involves implementing the necessary changes to align
with banking regulations, such as establishing appropriate governance structures, risk
management systems, and operational processes. The company may also need to restructure its
capital, update its information systems, and train employees on banking operations and
compliance requirements.

Ongoing Supervision. After the conversion, the bank will be subject to ongoing supervision and
regulation by the Bank of Tanzania. The regulatory authority will monitor the bank's operations,
financial performance, risk management practices, and compliance with regulatory guidelines.
The bank will be required to submit regular reports and undergo periodic audits and inspections
to ensure continued adherence to banking regulations.

It's important to note that the specific regulatory process and requirements for converting
a company into a bank may vary depending on the jurisdiction and the specific regulations of the
Bank of Tanzania. It is advisable for Kadosh Bank Limited to consult with legal and regulatory
experts to ensure compliance with all applicable guidelines and regulations.