Bank directors with Non-Performing Loans are to quit or be sacked, according to a new Code of Corporate Governance approved by the Central Bank of Nigeria.
The Director of Bank Examination Department of the Nigeria Deposit Insurance Corporation, Adedapo Adeleke, said the new code was instituted to address the rising cases of insider bad loans, which not only represent a conflict of interest, but are against the prudential guidelines for the industry.
Adeleke described corporate governance as an essential pillar in financial system stability.
Banks’ assets have depreciated in the last three years, with provisions for NPLs hitting N856.9 billion, due to the drop in crude oil prices.
A large part of these bad loans is owed by bank directors and are in most cases unsecured.
Besides, the economic recession showed that the financial industry still harbours weaknesses in governance, as seen in insider non-performing loans, unreported losses, huge exit packages for directors, over-domineering executive management, contravention of regulatory/prudential guidelines and lending limits, poorly appraised credits and weakening of shareholders’ funds, among others.
Adeleke, who spoke at the weekend in Kano during a media workshop organised by NDIC for finance reporters, said the Corporate Governance Code for Bank Directors is signed by all bank directors at the point of their appointment and has a section that empowers the banks’ boards to remove any director with insider non-performing loans.
Adeleke said: “If you are having non-performing loans, you will be removed.
“It is already being enforced except that the regulators are not being dramatic in publishing the names of affected directors.”