Home Business CBN Revises Self, Limits Bank Executives’ Tenure to 24 years

CBN Revises Self, Limits Bank Executives’ Tenure to 24 years

by Editor
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The Central Bank of Nigeria (CBN) has set new tenure limits for executive directors (ED). Deputy managing directors (DMD), and managing directors (MDs) of Banks and Bank Holding companies, which will take effect, August 1, 2023.

By this development, the cumulative tenure limit of directors (ED, DMD, MD, and NEDs) on the Board of the same bank is twenty-four (24) years. It was 20 years in the previous guidelines.

The Director, Financial Policy and Regulation department of the apex bank, Chibuzo Efobi, signed the new regulation released in Abuja on Friday.

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 partly read.

According to Section 3 of the guidelines the tenure of the MD/CEO of a bank shall be in accordance with the terms of engagement with the bank but subject to a maximum period of twelve (12) years.

The guidelines also provide for the tenure of the Deputy Managing Director (DMD) and Executive Director (ED). It also stated that the tenure of a DMD/ED of a bank shall not exceed a period of twelve (12) years.

However, where an ED becomes a DMD, a cumulative tenure of twelve (12) years applies and shall not be extended. This means, if an ED who has served for 5 years is made DMD, they only have 7 years left to serve as DMD. But where a DMD/ED becomes an MD/CEO of the same bank, his/her previous tenure as DMD/ED is not included in computing his/her tenure as MD/CEO. It, however, stated that this 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 guidelines for tenures MDs, DMD, and ED of banks is a change from a recent review conducted, under Godwin Emefiele. In that guideline, the tenure of ED, DMD, and MD was subject to a maximum of 10 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.

“An Executive (ED, DMD or MD/CEO) who exits from the Board of a bank either upon or prior to 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.

According to the guidelines, 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.

The new guidelines also stated that non-Executive Directors can serve for a maximum of 12 years, comprising three terms of four years each.

It further 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.”

 

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