The Central Bank of Nigeria (CBN) has issued a directive in its Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for 2024-2025, posted on its website, directing Chief Executive Officers (CEOs) and chairmen of banks who fail to publish their annual financial statements within 12 months after the end of the financial year should be immediately terminated.
The apex bank emphasized that such CEOs and chairmen should be fired without delay.
However, the possibility of this scenario seems to be remote. Banks, most of which are publicly quoted, have some of the highest corporate governance compliance ratings.
Accordingly, extant rules at the stock market where most banks are quoted, require quoted companies to submit their audited report and accounts not later than 90 days after the end of the financial year or 30 days after the end of the quarter.
Regulatory reports showed that banks have track records of compliance with the stock market rules.
In the publication of the annual financial statements section of the report, the apex bank said its decision to relieve non-compliant CEOs of banks and their chairmen is backed by the provisions of the Banks and Other Financial Institutions Act (BOFIA) 2020.
According to the CBN, banks and other financial institutions are required, subject to the written approval of the CBN, to publish not later than three months after the end of each financial year, their audited financial statements, in two national daily newspapers printed and circulated in Nigeria.
It stipulated that to facilitate the implementation of consolidated supervision, all banks and their subsidiaries shall continue to adopt December 31 as their accounting year end.
The report reads: “The CBN shall continue to hold the Board Chairman and Managing Director/Chief Executive Officer (MD/CEO) of a defaulting bank directly responsible for any breach and impose appropriate sanctions which may include barring the MD/CEO or his/her nominee from participating in Bankers’ Committee and disclosing the reason for such suspension; suspension of the foreign exchange dealership license of the CBN and its name sent to the Nigerian Exchange Group (in the case of a public quoted company); and removal of the Chairman and MD/CEO from office if the accounts remain unpublished for 12 months after the end of the bank’s financial year.”
The apex bank directed lenders to continue to comply with the guidelines on regulatory capital and the supervisory review process of the internal capital adequacy assessment process (ICAAP). It said that the circular revised the Basel II guidelines on Regulatory Capital and introduced some Basel III standards.
The CBN said the new policy shift would strengthen the regulation and supervision of local banks, promote the implementation of better risk management practices and governance arrangements within the Nigerian banks, and enhance the implementation of Basel II and III standards.
Besides, it is expected to reduce the risk of a build-up of excessive leverage in individual banks and the banking system and provide a safeguard against excessive concentration; strengthen the resilience of Nigerian banks by increasing the minimum requirement for high-quality capital and preservation of capital that can absorb losses; and promote the build-up of capital and liquidity buffers by the banks.
The report added: “Furthermore, the CBN said that to enhance credit risk management in the banking system, banks are mandated to adhere to the provisions that provide that the terms and conditions in offer letters and loan agreements be signed by prospective obligors, which shall include an undertaking by the 63 classified as confidential obligor permitting the CBN to have access to and utilise the deposits of the obligor in the banking industry when in default.”
The CBN said it will continue to enhance the credibility, reliability, efficiency, and safety of the national payments system through the formulation and enforcement of policies, guidelines, and appropriate payment initiatives, as well as collaboration with relevant stakeholders.
It said: “To achieve the vision of creating a payments system that is nationally utilized and internationally recognized, the CBN shall continue to implement the Payments System Vision (PSV) 2025 in the 2024/2025 fiscal years.
“This aims to promote the safety and efficiency of the payments system, deepen financial inclusion, improve the competitiveness of the payment service providers, and facilitate economic activities.”
