The Central Bank of Nigeria (CBN) has warned that it would 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, the apex bank released recently.
According to the guidelines, “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 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.
The guideline further states that 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.
It says 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.
The guidelines also stated that the government’s direct and indirect equity holding in a bank shall not be more than ten per cent (10%), which shall be divested to private investors within a maximum period of five years from the date of investment.”