CBN to go after bank CEOs, others over insider related loans

By Odunewu Segun

With a total loan portfolio of N18.53 trillion, out of which N1.85 trillion are Non-Performing Loans, and Deposit Money Banks directors’ accounting for N740 billion of the loans as insider related loans, the Central Bank of Nigeria has said it will soon go after such defaulting banks directors.

National Daily had earlier reported the recommendation by the Nigeria Deposit Insurance Corporation (NDIC) that directors of licensed banks, including microfinance banks (MFBs) and Primary Mortgage Banks (PMBs) be barred from obtaining credit facilities from their respective financial institutions as a way of curbing rising bad loans in the financial sector.

Speaking recently at the CBN-Financial Institutions Training Centre (FITC) continuous education programme for directors of banks and other financial institution, Governor of the CBN, Godwin Emefiele said this abuses has contributed immensely to the liquidity crisis facing some banks in the country, and would have crippled some if not for the intervention of the CBN to safeguard depositors’ fund.

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Speaking on the theme: “The Next Level of Corporate Governance Practice” Emefiele said many bank chief and executive directors abused their offices, waving aside rules and regulations, granting loans to their businesses and friends from depositors fund at a very low interest rates,

Emefiele said even though the shareholders are important to the banking sector, but the most important stakeholders in the banks are the depositors. He said depositors’ funds are 10 times higher than shareholders’ funds, hence the interest of the depositors that should be paramount.

The CBN boss said running an efficient and sound bank is all about strong governance adding that weak governance ensues when shareholders employ inexperienced or unenlightened people to run their banks.

He said that prior to the global financial crisis of 2007 to 2009, it was taken for granted that the banking sector in Nigeria was safe and sound.

However, this trust proved to be misplaced as it was realized that none of the 25 banks that scaled the CBN consolidation exercise was immune from failure if they operated in a poor corporate governance environment.

He said the CBN would continue to deploy more robust and risk-sensitive supervisory framework in line with global best practices in consonance with the rapidly changing environment to nip potential crisis in the bud.

Recall that in February, while defending the Corporation’s 2017 budget before the House of Representatives, MD/CEO, NDIC, Alhaji Umaru Ibrahim had disclosed that Directors were responsible for 40 per cent of the N1.85 trillion bad loans accumulated by lenders as at December 2016.

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He also said that Directors were responsible for about 40 per cent of N139.45 billion bad loans in microfinance banks and mortgage banks. Specifically, he said: “As at December 2016, the 25 Deposit Money Banks (DMBs) had total loans portfolio of N18.53 trillion out of which N1.85 trillion or 10 per cent were Non-Performing Loans (NPLs) where N740 billion or 40 per cent constituted Insider/Directors related loans.