The Central Bank of Nigeria (CBN) has directed bank directors with non-performing insider-related loans to immediately step down, as part of efforts to strengthen corporate governance and risk management within the financial sector.
The directive was issued in a circular signed by Adetona Adedeji, Acting Director of Banking Supervision, on Monday, outlining strict measures to address insider-related lending and improve financial discipline among bank executives.
What Are Insider Loans?
Insider loans refer to credit facilities granted by a bank to its own executives, directors, employees, major shareholders, or related parties. When these loans become non-performing, they pose significant financial risks and corporate governance challenges.
To curb the rising cases of non-performing insider loans, the CBN has instructed banks to enforce collateral recovery and seize the shareholdings of affected directors as part of debt recovery efforts.
“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.
Additionally, the CBN referenced Section 19 of the Banking and Other Financial Institutions Act (BOFIA), 2020, all banks are to implement the following directives regarding the insider-related facilities in their books.
The apex bank said, “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.
“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.”
