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The Central Bank of Nigeria (CBN) has issued a directive ordering bank directors with non-performing insider-related loans to step down immediately. This move aims to strengthen corporate governance and improve risk management in the banking sector. Insider loans refer to loans granted by a bank to its own executives, directors, employees, major shareholders, or related parties.
According to the CBN, “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 directive, signed by the Acting Director of Banking Supervision, Adetona Adedeji, on Monday, also instructs banks to comply with Section 19 of the Banking and Other Financial Institutions Act 2020. This requires ensuring proper regulation of insider-related loans, including those approved without specific timelines.
In this regard, the CBN stated, “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 BOFIA 2020, which were approved by the CBN without specific timelines.
Additionally, the CBN emphasized that all affected individual director-related facilities should be brought within the prescribed limit of 5% of the bank’s paid-up capital, while the aggregate insider facilities for the bank should not exceed the 10% paid-up capital limit.
This directive is part of the CBN’s efforts to promote transparency and accountability in the banking sector. It also aims to minimise financial risks by ensuring that banks take action to recover debts and enforce collateral.
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