The Central Bank of Nigeria (CBN) has approved a new Code of Corporate Governance that stipulates that Bank Directors with non-performing loans (NPLs) are to be sacked.
This was revealed by Director, Bank Examination Department at the Nigeria Deposit Insurance Corporation (NDIC), Adedapo Adeleke, who 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.
Investigation revealed that Banks’ assets have depreciated in the last three years, with provisions for NPLs hitting N856.9 billion, while a large part of these bad loans is owed by Bank Directors and are in most cases unsecured.
Adeleke, who spoke on Kano, at the weekend, 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.
“That section says: ‘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,” Adeleke said.
Speaking on the theme: Curtailing the Growth of Non-Performing Loans in Banks: The Role of Regulators and Supervisors, he disclosed that the rate of non-performing loans is in excess of 20 per cent as against the five per cent regulatory threshold.
“If the economy is improving, and government can help to fulfill its responsibilities, including prompt payment of salaries, the level of non-performing loans in the industry will drop,” he said.
“If people working in companies that are troubled borrowed from banks, it is important that the loans be provided for when their employers can no longer pay salaries.”
He however, expressed confidence that the current rise in crude oil prices will impact positively on the banking industry and businesses and help reduce the rising cases of bad loans in the industry.