The Central Bank of Nigeria (CBN) has demanded that bank directors with non-performing insider loans resign immediately.
Insider loans are those made by a bank or financial institution to its own executives, directors, workers, large shareholders, or other linked parties.
On Monday, the Central Bank of Nigeria issued a circular signed by Adetona Adedeji, acting director of banking supervision.
“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.”
To reduce potential risks, the financial authority encouraged banks to take action to recover outstanding debts by pursuing collateral recovery and seizing concerned directors’ shareholdings.
The CBN added that, in accordance with Section 19 of the Banking and Other Financial Institutions Act (BOFIA), 2020, all banks must apply the following directions regarding insider-related facilities in their records.
Apex bank stated, “Insider-Related Facilities Approved by the CBN without Specific Timelines: Banks are required to regularize 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.”
Paid-up capital is the actual amount of money received by a firm from its shareholders in exchange for stock.
Regarding insider-related facilities issued by the CBN with particular timelines, the apex bank stated that all loans must be regularized within the allowed timeframes.