By Tony Obiechina, Abuja
The Central Bank of Nigeria (CBN) is set to sanction, by blacklisting bank directors with loans that remain non-performing for more than one year.
This was contained in the new corporate governance guidelines for commercial banks, financial holding Companies (FHCs), merchant banks, non-interest and payment service banks, released by the Bank on Friday.
“Any director whose credit facility or that of his/her related interests remains non-performing in the banking subsidiary of an FHC, for more than one year, shall cease to be on the Board of the Financial Holding Company (FHC) shall be blacklisted from sitting on the Board of such banking subsidiary or that of any other financial institution under the purview of the CBN,” the guidelines stated.
The CBN said no loan/advance and interest thereon to a director of an FHC by the banking subsidiary shall be written-off without its prior approval.
A subsidiary of the FHC, which renders services to the FHC may extend similar services to other entities within the Group that so desire, on the same terms and conditions, the guidelines stated.
It added that all intra-group transactions shall be conducted at arm’s length and in compliance with the extant laws and regulations guiding the operations of the entities
The apex bank’s guideline also prescribed that all services between an FHC and its subsidiaries will be guided by Service Level Agreements (SLAs) and/or shared services arrangements in line with the CBN Guidelines for Shared Services Arrangements for Banks and Other Financial Institutions.
Under protection of shareholders right, the guidelines stated that except where prior approval of the CBN is granted, no individual, group of individuals, their proxies or corporate entities shall own controlling interest in more than one FHC.
It says except with the prior written approval of the CBN, no FHC or any of its director, shareholder or agent shall enter into an agreement which results in: a change in the control of the FHC, the transfer of shareholding of 5 per cent and above in the FHC; and/or an increase in shareholding to 5 per percent or more in the FHC.
The CBN said its prior approval and no objection shall be sought and obtained, before any acquisition of shares of an FHC by an investor (including through the capital market), that would result in equity holding of five per cent (5%) and above.
In a circular signed by Chibuzo Efobi, CBN’s director, financial policy and regulation, the apex bank said the guidelines take effect August 1, 2023.
The circular said the new guidelines supersedes all previous codes, circulars, and related directive on corporate governance issued by the CBN.
“Banks and financial holding companies are invited to note the responsibilities imposed on their boards by these guidelines and especially on the executive compliance officers (where applicable)”, the circular stated.
The Financial Reporting Council (FRC) of Nigeria in 2019 issued the Nigerian Code of Corporate Governance (hereinafter referred to as “NCCG 2018”) as the single Corporate Governance Code for the country.
