In an effort to strengthen corporate governance and reduce credit risk exposure in the banking sector, the Central Bank of Nigeria (CBN) has ordered bank directors with non-performing insider-related loans to resign from their positions.
This is disclosed in a circular addressed to all banks, the apex bank mandated compliance with insider-related credit limits as stipulated in Section 19 of the Banking and Other Financial Institutions Act, 2020.
The apex bank directed banks to ensure that directors with non-performing loans step down immediately while initiating recovery efforts on outstanding debts, including seizing collaterals and liquidating the shareholdings of affected directors.
“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.”
The directive also requires banks to regularise all insider-related facilities that exceed the statutory limits within 180 days.
Under the new compliance rule, insider-related loans must be brought within the prescribed 5 per cent limit of a bank’s paid-up capital for individual directors, while total aggregate insider facilities for a bank must not exceed 10 per cent of its paid-up capital.