The Central Bank of Nigeria (CBN) has announced the approval of a new code of corporate governance, setting a maximum tenure of 12 years for bank managing directors and chief executive officers (CEOs).
The CBN disclosed this information in a circular dated July 13, 2023, signed by the director of the financial policy and regulation department, Chibuzo Efobi.
In February, the CBN had introduced a rule limiting executives to a cumulative tenure of 20 years across the banking sector. However, the new circular states that the recently issued code supersedes all previous codes, circulars, and related directives on corporate governance issued by the CBN.
The implementation of the new rules is scheduled to take effect from August 1, 2023. The code specifies that deputy managing directors and executive directors (EDs) of banks will also have a maximum tenure of 12 years.
The CBN further clarified that when an executive director becomes a deputy managing director, a cumulative tenure of 12 years applies and cannot be extended.
The code also establishes the minimum and maximum number of directors on the boards of commercial, merchant, and non-interest banks (CMNIBs) as seven and 15, respectively. For payment service banks (PSBs), the minimum and maximum number of directors on the board will be seven and 13, respectively.
The CBN stipulated that the board, subject to its approval, will be responsible for appointing the MD/CEO, executive directors, and senior management staff. The circular stated, “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.”
Remuneration for MD/CEO, DMDs, and EDs will be linked to performance and structured to prevent excessive risk-taking. The board is also required to approve a succession plan for the MD/CEO, other EDs, and senior management staff, with a mandatory review at least once every two years.
Additionally, the new policy limits the number of members from the same extended family serving on a bank’s board, allowing only one member at a time to occupy the positions of MD/CEO, chairman, or ED.
In cases of mergers, acquisitions, takeovers, or any form of business combination involving the appointment of a director from the legacy institution’s board, the length of service for that director will include both pre and post-combination periods.
The CBN has urged banks and financial holding companies to take note of the responsibilities imposed by the new code on their boards.
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