CBN orders bank directors with bad loans to resign

Bank directors who have non-performing insider-related loans have been required to resign immediately by the Central Bank of Nigeria.

A bank's loans to its own executives, directors, staff, significant shareholders, or other connected people are referred to as insider loans.

Adetona Adedeji, the Acting Director of Banking Supervision, signed a circular on Monday announcing the directive.

The CBN claims that the decision is to enhance risk management and corporate governance in the banking industry.

The apex bank directed banks to take action by recouping debts through collateral enforcement and confiscating the shares of impacted directors in order to reduce financial risks.

"Directors who have non-performing insider-related facilities must resign from the board right away, and the bank should start immediately fixing the loans through the recovery of the collaterals, including the shareholdings of the affected directors,” the circular reads.

The CBN further directed banks to comply with Section 19 of the Banking and Other Financial Institutions Act 2020 by ensuring proper regulation of insider-related 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 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 per cent of the bank’s paid-up capital, while the aggregate insider facilities for the bank should not exceed the 10 per cent paid-up capital limit,” it added.

Paid-up capital refers to the total amount of money a company has received from shareholders in exchange for shares.
The CBN declared that all outstanding loans must be regularised within the allowed term for insider-related loans that were granted with particular timelines.