Effective August 1, 2023, bank executives will no longer spend more than 24 years in office, the Central Bank of Nigeria (CBN) has said.
The top positions include Executive Directors, Deputy Managing Directors (DMD), and Managing Directors (MDs) of banks and bank holding companies.
The Director, Financial Policy and Regulation department of the apex bank, Chibuzo Efobi, signed the new regulation released in Abuja yesterday.
The circular, with the reference number, ‘FPR/DIR/PUB/CIR/001/078,’ said the circular was in accordance with powers conferred by the Central Bank of Nigeria (CBN) Act 2007 and the Banks and Other Financial Institutions Act 2020.
“The Central Bank of Nigeria (CBN), hereby issues the Corporate Governance Guidelines for Commercial, Merchant, Non-Interest, and Payment Services Banks in Nigeria; and the Corporate Governance Guidelines for Financial Holding Companies in Nigeria,” the circular stated in part.
It explained that in developing the guidelines, the CBN adapted relevant principles and recommended practices of the Nigerian Code of Corporate Governance issued by the
Financial Reporting Council in 2018, global corporate governance practices as well as other related governance codes, circulars and directives made by the CBN.
It called the attention of banks and financial holding companies to note the responsibilities imposed on their boards by these guidelines, and especially on the Executive Compliance Officers (where applicable).
The CBN stressed that the new guidelines supersede all previous codes, circulars and related directives on corporate governance issued by the CBN.
The CBN was quick to note that the circular is subject to a cumulative tenure limit of 24 years, which was covered in Section 8 of the Guidelines.
Section 8 states that the cumulative tenure limit of directors (ED, DMD, MD, and NEDs) on the Board of the same bank is twenty-four (24) years.
The new circular also introduced two years cooling period for banks’ top brass, saying that upon expiration of a maximum tenure, executive directors must serve out a cooling-off two years before being eligible for appointment as non-executive directors in the same bank subject to applicable tenure limits.
Independent non-executive directors have a maximum of eight years, not exceeding two terms of four years each.
“An Executive (ED, DMD or MD/CEO), who exits from the Board of a bank either upon or before the expiration of his/her maximum tenure, shall serve out a cooling period of two (2) years before being eligible for appointment as a NED in the same bank, subject to applicable cumulative tenure limits.
Where an Executive (ED, DMD or MD/CEO) of a bank is appointed to the Board of its FHC in any role, a cooling-off period of two years shall apply,” it stated.
Under the new guidelines, Non-Executive Directors can serve for a maximum of 12 years, comprising three terms of four years each.
It added: “NEDS (with the exception of INEDs) of a bank shall serve for a maximum of twelve (12) years, comprising three terms of four years. To qualify as a NED in a bank, the proposed NED shall not be an employee of a financial institution except where the bank is promoted by that financial institution and the proposed NED is representing the interest of that financial institution. In the case of a commercial bank with a NIB window, at least one NED shall be knowledgeable and/or have experience in the field of Islamic finance or Islamic Commercial Jurisprudence.”