…amends guidelines on mgt of dormant accounts
The Central Bank of Nigeria (CBN) has directed bank directors with non-performing insider-related loans to step down immediately.
The apex bank gave the directive in a circular dated February 17, which was signed by Adetona Adedeji, acting director of banking supervision.
Insider loans refer to credit facilities granted by a bank or financial institution to its own executives, directors, employees, major shareholders, or other related parties. According to the CBN, the directive is aimed at strengthening corporate governance and improving risk management in the banking sector.
The regulator also ordered banks to take steps to recover outstanding debts by enforcing collateral recovery and seizing shareholdings of affected directors.
Furthermore, it directed lenders to regularize within 180 days, all insider-related facilities above the limits prescribed in Section 19 (5) of the BOFIA, 2020, which it had approved without specific timelines.
The CBN stated: “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, it directed banks to comply with Section 19 of the Banking and Other Financial Institutions Act 2020 by ensuring proper regulation of insiderrelated loans.
“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,” the apex bank stated.
It stressed that banks are expected to comply with the directives effective immediately in adherence to regulatory requirements and sound corporate governance practices. Analysts note that insider lending has long been a source of corporate governance risk in Nigeria.
They, however, believe that while most of the country’s Tier 1 lenders, which have spent the past decade cleaning up their books and strengthening corporate governance structures, are unlikely to face significant challenges complying with the new directives, smaller and midsized banks could struggle to meet the deadline without significant balance sheet restructuring.
