This was contained in the new corporate governance
guidelines for commercial banks, financial holding Companies (FHCs), merchant
banks, non-interest and payment service banks, released on Friday by the CBN.
“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 guidelines stated.
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.
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, the guidelines stated.
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.
Under protection of shareholders right, the guidelines
stated that except where prior approval of the CBN is granted, no individual,
group of individuals, their proxies or corporate entities shall own controlling
interest in more than one FHC.
It says except with the prior written approval of the CBN,
no FHC or any of its director, shareholder or agent shall enter into an
agreement which results in: a change in the control of the FHC, the transfer of
shareholding of 5 per cent and above in the FHC; and/or an increase in
shareholding to 5 per percent or more in the FHC.
The CBN said its prior approval and no objection shall be
sought and obtained, before any acquisition of shares of an FHC by an investor
(including through the capital market), that would result in equity holding of
five per cent (5%) and above.
In a circular signed by Chibuzo Efobi, CBN’s director,
financial policy and regulation, the apex bank said the guidelines take effect
August 1, 2023.
The circular said the new guidelines supersedes all previous
codes, circulars, and related directive on corporate governance issued by the
CBN.
“Banks and financial holding companies are invited to note
the responsibilities imposed on their boards by these guidelines and especially
on the executive compliance officers (where applicable)”, the circular stated.
The Financial Reporting Council (FRC) of Nigeria in 2019
issued the Nigerian Code of Corporate Governance (hereinafter referred to as
“NCCG 2018”) as the single Corporate Governance Code for the country.
The NCCG 2018 replaced all sectoral codes in Nigeria
including the extant Code of Corporate Governance for Banks and Discount Houses
in Nigeria issued by the Central Bank of Nigeria (CBN) in May 2014.
Following the pronouncement of the FRC, for sector
regulators to issue sector-specific guidelines on corporate governance for
institutions under their regulatory purview, the CBN said it has adapted the
Principles and Recommended Practices of NCCG 2018 in developing this Guidelines
for Commercial, Merchant, Non-Interest and Payment Service
Banks (hereinafter referred to as “bank(s)”), taking into
account, the peculiarities of the sub-sectors.
“The CBN, pursuant to the provisions of Section 2(d) of the
CBN Act 2007, and Sections 56(2) and 67(1) of the Banks and Other Financial
Institutions Act (BOFIA 2020), hereby issues this regulation to be cited as the
“Corporate Governance Guidelines for Commercial, Merchant, Non-Interest and
Payment Service Banks in Nigeria”, the CBN said.
The guidelines 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.”