CBN Directs Bank Directors with Non-Performing Insider Loans to Resign

The Central Bank of Nigeria (CBN) has ordered bank directors with outstanding non-performing insider loans to step down, reinforcing financial accountability.

The Central Bank of Nigeria (CBN) has ordered bank directors with non-performing insider-related loans to resign immediately.

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

Insider loans are credit facilities provided by banks to their executives, directors, employees, or major shareholders.

The circular states: “Directors with underperforming insider-related facilities must resign from the board immediately. Meanwhile, the bank should begin immediate remediation by recovering collateral, including any shareholdings of the involved directors.”

The CBN also mentioned that, in accordance with Section 19 of the Banking and Other Financial Institutions Act (BOFIA), 2020, all banks must adhere to the following directives concerning insider-related facilities within their records.

Banks must regularize all insider-related facilities that exceed the limits outlined in Section 19 (5) of the BOFIA, 2020 and were approved by the CBN without specific timelines. They have a period of 180 days to do so.

The CBN stated, “Therefore, every individual director-related facility affected should be adjusted to fall within the prescribed limit of 5 percent of the bank’s paid-up capital. Additionally, all aggregate insider facilities for the bank must not surpass the 10 percent limit of its paid-up capital.”

Regarding insider-related facilities approved by the CBN with designated timelines, the central bank stated that all loans must be regularized within those specified periods.

The CBN stated that banks are required to implement the directives immediately, in accordance with regulatory standards and good corporate governance practices.