The Central Bank of Nigeria (CBN) has instructed bank directors with non-performing insider-related loans to step down immediately as part of measures to strengthen corporate governance and improve risk management in the banking sector.
The directive was issued in a circular signed by the Acting Director of Banking Supervision, Adetona Adedeji, on Monday.
The CBN stated that the action is aimed at reducing financial risks in the sector. The circular reads: “Directors with non-performing insider-related facilities are required to step down immediately from the board, while the bank should commence immediate remediation of the loans through the recovery of the collaterals, including the shareholdings of the affected directors.”
In addition, the apex bank emphasized the need for compliance with Section 19 of the Banking and Other Financial Institutions Act (BOFIA) 2020, which governs insider-related loans.
Banks have been instructed to regularize insider-related facilities above the prescribed limits within 180 days, and bring them in line with the limits set by the CBN.
“Insider-related facilities approved by the CBN without specific timelines: Banks are required to regularize within 180 days all insider-related facilities above the limits prescribed in Section 19(5) of BOFIA 2020, which were approved by the CBN without specific timelines.
Accordingly, all affected individual director-related facilities should be brought within the prescribed limit of 5 per cent of the bank’s paid-up capital, while the aggregate insider facilities for the bank should not exceed the 10 per cent paid-up capital limit,” the CBN stated.
For insider loans with specific timelines, the CBN directed that all outstanding loans must be regularized within the permitted period.
