The Central Bank of Nigeria has ordered the directors of commercial banks that have taken loans above the approved regulatory limit under the Banking and Other Financial Institutions Act (BOFIA) 2020......CONTINUE READING THE ARTICLE FROM THE SOURCE>>>>>
The CBN also directed banks to cut insider lending in line with the approved regulatory limit.
This comes in view of In view of the rise in Non-Performing Loans (NPL) in the banking industry.
The apex bank gave the directive in a letter to money deposit banks and other financial institutions.
CBN also threatened to sanction commercial banks failing to comply with the order.
CBN gave 180-day deadline for financial institutions to comply with all insider-related credit facilities that exceed the limit of BOFIA 2020.
The circular said, “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.”
Insider lending occurs when a bank makes a loan to one or more of its own officers or directors.
The BOFIA (2020) Section 19 (5) stipulates that individual directors cannot hold insider loans valued at more than 5 per cent of the bank’s paid-up capital, and all insider-related loans within the bank must not exceed 10 per cent of the bank’s total paid-up capital.