JUST IN: Experts React as CBN Tells Bank Directors to Step Down Over Non-Performing Loans

In order to improve corporate governance and lower exposure to credit risk, the Central Bank of Nigeria required bank directors who had non-performing insider-related debts to quit their jobs right immediately....Read Full Article >>➤

This decision has garnered approval from several banking industry experts and shareholders. On Monday, the apex bank had issued a circular, signed by Dr. Adetona Adedeji, Acting Director of Banking Supervision, requiring adherence to insider-related credit restrictions as outlined in Section 19 of the Banking and Other Financial Institutions Act, 2020.

In addition to starting recovery measures on outstanding debts, which include seizing collateral and liquidating the affected directors’ shareholdings, it instructed banks to make sure that directors with non-performing loans resign right away.

How shareholders are reacting
Speaking on the directive, Marcel Okeke, the former top economist at Zenith Bank, bemoaned the fact that insider loans had turned into a problem that needed to be fixed.

He said,
“Insider abuse is a serious problem; they take advantage of being a director and mess up the whole internal process, so this is a good thing. As long as it is something that would sanitise the system and deal with abuse of position, it is in the interest of the system. It will be for the good of the banking system even with the ongoing recapitalisation.

“The stepping down doesn’t necessarily mean that they won’t hold the shares that they have after all; all the banks have gone far in terms of strategies and plans for recapitalisation. If such directors step down, I don’t think it will create much of a problem for the banks.”

Moses Igbrude, the National Coordinator of the Independent Shareholders Association of Nigeria, praised the move as well, stating that the apex bank should implement this section of the BOFIA at this time.

He said,
“This directive from CBN is a timely and proactive oversight function to avoid repeating the mistake of the last post-consolidation era. Where insider-related loans were abused by owners, directors, and management of banks. CBN should not only stop here but should be on continuous monitoring and sanctioning anyone finds wanting.

The President of the Pragmatic Shareholders Association of Nigeria, Bisi Bakare, said,
“It’s a welcome development that is aimed at checking the effect of insider-related loans, which has brought some banks to their knees. It will, in the long run, reduce non-performing loans, enhance the financial health of the banks, and ensure the financial stability of the banking sector.

CBN banks to publish details of dormant accounts
Legit.ng reported that The Central Bank of Nigeria (CBN) has directed Access Bank, United Bank for Africa (UBA), Guaranty Trust Bank (GTBank), and other financial institutions to publish details of dormant accounts and unclaimed funds.

The apex bank gave the directive in a circular titled Guidelines on Management of Dormant Accounts, Unclaimed Balances and Other Financial Assets in Banks and Other Financial Institutions in Nigeria released on its website on Tuesday, February 18.

According to the circular signed by Michael C. Akuka for the Director of Financial Policy and Regulation Department, banks must publish this information on their official websites, while financial institutions without websites must use their association’s platform.