Bank directors with bad insider loans must step down — CBN

• 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
• Paid-up capital refers to the total amount of money a company has received from shareholders in exchange for shares.

The Central Bank of Nigeria has ordered bank directors with non-performing loans to insiders to vacate their positions immediately.

These insider loans refer to financial assistance provided by banks to their executives, directors, employees, major shareholders, or related parties.

The CBN issued this directive through a circular signed by Adetona Adedeji, Acting Director of Banking Supervision, on Monday.

According to the apex bank, this move aims to enhance corporate governance and risk management in the banking sector.

To mitigate potential risks, the financial regulator advised banks to recover outstanding debts by enforcing collateral recovery and seizing shareholdings of affected directors.

“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 reads.

The CBN further stated that, in line with the Banking and Other Financial Institutions Act (BOFIA) 2020, banks must implement directives regarding insider-related facilities.

“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,” the apex bank said.

“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.”

Paid-up capital refers to the actual amount of money received by a company from shareholders in exchange for shares of stock.

Regarding insider-related facilities approved by the CBN with specific timelines, the apex bank stated that all loans must be regularised within the permitted timelines.

The CBN said it is expected that banks comply with the directives immediately, adhering to regulatory requirements and sound corporate governance practices.