The Central Bank of Nigeria

CBN Implements Stricter Governance Guidelines for Banks, Threatens Sanctions

The Central Bank of Nigeria (CBN) has shaken up the banking industry with new corporate governance guidelines, warning that bank directors with non-performing loans for over a year will face sanctions, including being blacklisted from board positions. The guidelines, released on Friday, aim to enhance transparency and accountability within the sector.

According to the CBN, any director with a non-performing loan in a bank subsidiary of a financial holding company (FHC) for more than a year will cease to serve on the FHC’s board and be banned from holding positions in any other financial institution under the CBN’s purview. The guidelines also restrict the transfer or write-off of loans to directors without prior approval.

Additionally, the guidelines prohibit controlling interests in multiple FHCs without CBN approval and require approval for acquisitions resulting in equity holdings of 5% or more. The government’s equity holding in a bank is capped at 10%, with divestment to private investors expected within five years.

The CBN’s move comes as part of ongoing efforts to align with the Nigerian Code of Corporate Governance and strengthen sector-specific governance standards. The guidelines will take effect on August 1, 2023.

Banks and financial holding companies are urged to take note of their responsibilities under the new guidelines, and compliance officers are specifically highlighted as key players in ensuring adherence.

With these stricter regulations, the CBN aims to foster greater accountability and robust governance practices, reinforcing stability and trust in Nigeria’s banking sector.