From Victor Osula, Abuja
The Central Bank of Nigeria (CBN) has directed bank directors with non-performing insider-related loans to step down immediately from the board.
A circular signed on Monday by Adetona Adedeji, the CBN’s acting director of banking supervision, mandated that the banks commence the immediate remediation of the loans by recovering the collateral, including the shareholdings of the affected directors.
Adedeji said the apex bank’s decision is aimed at strengthening corporate governance and improving risk management in the banking sector.
“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 read.
Insider loans refer to credit facilities granted by banks to their executives, directors, employees, major shareholders, or affiliated parties. Poor management of such loans has been a significant concern in Nigeria’s banking sector, posing risks to financial stability.
Meanwhile, all banks are now required to ensure that insider-related loans exceeding statutory limits are brought within the approved thresholds within 180 days, a move that is intended to curb excessive exposure to insider-related loans, which could compromise the stability of financial institutions.
Under Section 19(5) of BOFIA, individual bank directors are prohibited from holding insider loans that exceed 5 percent of the bank’s paid-up capital. Furthermore, the total insider-related credit exposure for an entire bank must not exceed 10 percent of its paid-up capital.
“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.
“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”, it stated.
