By Chris Agabi
All bank directors with non-performing insider-related loans are to resign from their offices immediately following a directive by the Central Bank of Nigeria (CBN).
The CBN issued the directive in a circular dated Monday, February 17, signed by Adetona Adedeji, the Acting Director of Banking Supervision.
The CBN also ordered the banks to recover outstanding debts by enforcing collateral recovery and seizing shareholdings of affected directors.
The apex bank said it is to strengthen corporate governance and enhance risk management in the banking sector.
Our correspondent recalled that several banks that failed on the past were largely due to insider loan deals that failed and other corporate governance infractions.
Insider loans are the credit facilities granted by the bank to its executives, directors, employees, major shareholders and related parties.
The apex bank further directed that banks must regularise all insider-related facilities within 180 days, particularly those that exceed limits prescribed in Section 19 (5) of the Banking and Other Financial Institutions Act (BOFIA), 2020, and were previously approved without specific timelines.
The circular said: “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.”
It also stressed the importance of compliance with Section 19 of BOFIA 2020, which limits insider-related loans:
“Banks are required to regularise within 180 days, all insider-related facilities above the limits prescribed in Section 19 (5) of BOFIA, 2020.
“Individual director-related facilities must be brought within the 5 per cent paid-up capital limit, while the aggregate insider facilities for the bank must not exceed 10 per cent of its paid-up capital.”
