More heads to roll over banks’ non-performing loans

The Central Bank of Nigeria has given the indication that more top management staff of some banks would have to be relieved of their post as a way of injecting sanity in the affected banks.

Director of Banking Supervision in the Nigerian Deposit Insurance Corporation (NDIC) Adedapo Adeleke disclosed this during a seminar held in Kano for business and financial editors held in Kano.

According to him, the bank had introduced a new code of corporate governance which mandates that bank directors with non-performing loans will be asked to step down or be sacked.

While no mention was made of names, the CBN had last year sacked board members of Skye bank. The action according to the apex bank was taken due to the bank’s failure to meet prudential and liquidity requirements. The bank had allegedly written to the Presidency for assistance in recovering loans from its past chairman, Tunde Ayeni which had become doubtful.

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A cursory look at the financials of Unity Bank reveal loans was held by directors of the bank, yet no punitive action was taken. Banks in the country have also been reluctant to classify several insider loans as non-performing.

“We have the code of corporate governance and code for bank directors. You sign these codes before you become a director. It is part of the employment terms. One of the things in these codes is that if you are having a non-performing loan, it is a ground to remove you from being a director.”

According to Adeyemi, most of the banks that had failed in the last two decades was due to bad loans.

He said between 1994 and 2011, the CBN closed down over 50 banks, and has discovered over the time that most of the loans that dragged these banks down where insider loans given to their directors,