By Anastasia John E.
The Central Bank of Nigeria (CBN) has issued a directive requiring bank directors with non-performing insider loans to resign immediately. The order, issued in a circular signed by Acting Director of Banking Supervision, Adetona Adedeji, aims to bolster corporate governance and risk management within the banking sector.
Insider loans, those granted to a bank’s executives, directors, employees, major shareholders, or related parties, have come under scrutiny. The CBN’s circular mandates that directors with such non-performing loans must step down from their board positions. Furthermore, banks are instructed to immediately begin remediating these loans, including recovering collateral and shareholdings of the directors involved.
The CBN, citing Section 19 of the Banking and Other Financial Institutions Act (BOFIA), 2020, has outlined further directives:
- Insider-Related Facilities Approved Without Timelines: Banks have 180 days to regularize all insider-related loans exceeding the limits outlined in Section 19 (5) of BOFIA 2020, which were previously approved by the CBN without specific timelines. This means individual director-related loans must be brought within 5% of the bank’s paid-up capital, and aggregate insider facilities should not exceed 10% of paid-up capital.
- Insider-Related Facilities Approved With Timelines: All such loans must be regularized within their original permitted timelines.
The CBN has instructed banks to comply with these directives immediately, emphasizing adherence to regulatory requirements and sound corporate governance practices. This move signals the CBN’s commitment to strengthening the banking sector and addressing potential risks associated with insider lending.
