The Central Bank of Nigeria (CBN) is set to blacklist bank directors with loans that remain non-performing for more than one year.
This was contained in new corporate governance guidelines for commercial banks, financial holding companies (FHCs), merchant banks, non-interest and payment service banks, CBN Director, Banking Supervision, Haruna Mustafa, released on Friday.
A non-performing loan (NPL), popularly called bad loan, is a loan collected whose scheduled payments have not been made by the debtor over a period of time.
“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.
“No loan/advance and interest thereon to a director of an FHC by the banking subsidiary shall be written-off without its prior approval.”
Further, 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.
Recall that in March, CBN’s Deputy Governor, Economic Policy, Dr. Kingsley Obiora, had declared the banking system as sound, safe, and resilient, as the “Industry Non-performing Loans decreased from 4.9% in December 2021 to 4.2% in December 2022, which was below the maximum prudential requirement of 5.0%.”
He added that “The decline in NPLs was attributable to write-offs, restructuring of facilities, Global Standing Instruction (GSI) and sound credit risk management by banks.”
No loan/advance and interest thereon to a director of an FHC by the banking subsidiary shall be written-off without its prior approval.
