CBN directs bank directors with non-performing insider loans to resign immediately

By Mariam Abeeb

The Central Bank of Nigeria (CBN) has directed bank directors with non-performing insider-related loans to step down immediately.

Insider loans are loans granted by a bank or financial institution to its own executives, directors, employees, major shareholders, or other related parties.

CBN gave the directive in a circular signed by Adetona Adedeji, acting director of banking supervision, on Monday.

According to the apex bank, the move is to strengthen corporate governance and risk management within the banking sector.

To mitigate potential risks, the financial regulator advised banks to take steps to recover outstanding debts by enforcing collateral recovery and seizing 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 circular reads.

The CBN further said in line with the provisions of Section 19 of the Banking and Other Financial Institutions Act (BOFIA), 2020, all banks are to implement the following directives regarding the insider-related facilities in their books.

“Insider-Related Facilities Approved by the CBN without Specific Timelines: Banks are required to regularise within 180 days, all insider-related facilities above the limits prescribed in Section 19 (5) of the BOFIA, 2020, which were approved by the CBN without specific timelines,” the apex bank said.

“Accordingly, all affected individual director-related facilities should be brought within the prescribed limit of 5 percent of the bank’s paid-up capital, while the aggregate insider facilities for the bank should not exceed the 10 percent paid-up capital limit.”

Paid-up capital is the actual amount of money that a company has received from shareholders in exchange for shares of stock.

On insider-related facilities approved by the CBN with specific timelines, the apex bank said all loans must be regularised within the permitted timelines.

CBN added that banks are expected to comply with the directives effective immediately in adherence to regulatory requirements and sound corporate governance practices.