CBN Revises Tenure Limits for Bank Executives to a Maximum of 24 Years

The Central Bank of Nigeria (CBN) has issued a release that Bank's Executives will no longer be permitted to hold positions for more than 24 years starting August 1, 2023.

This statement was issued to Executive Directors, Deputy Managing Directors (DMDs), and Managing Directors (MDs) of banks and bank holding companies which is considered as one of the top positions in all financial institutions in Nigeria.

Chibuzo Efobi, the apex bank's Director of Financial Policy and Regulation, signed the new regulation yesterday in Abuja.

The circular, with the reference number 'FPR/DIR/PUB/CIR/001/078,' said that it was issued in line with the authorities granted 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 establishing the regulations, the CBN adapted relevant principles and recommended practices from the Nigerian Code of Corporate Governance issued by the Financial Reporting Council in 2018, global corporate governance practices, and other related governance codes, circulars, and directives issued by the CBN.

It drew the attention of banks and financial holding companies to the duties imposed on their boards by these rules, particularly on the Executive Compliance Officers.

The CBN emphasized that the new standards override all earlier codes, circulars, and related instructions on corporate governance published by the CBN.

The CBN was quick to point out that the circular is subject to a cumulative tenure restriction of 24 years, as specified in Section 8 of the Guidelines.

Section 8 says that the total 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 established a two-year cooling period for bank executives, stating that upon the expiration of a maximum tenure, executive directors must serve a two-year cooling-off period before becoming qualified for appointment as non-executive directors in the same bank within the applicable tenure limits.

Part of the Circular for Bank’s Directors

“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.”

Part of the Circular for Non-Executive Directors

“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.”

Independent non-executive directors have a maximum tenure of eight years, with no more than two tenures of four years each.