The Central Bank of Nigeria (CBN) has approved a new code of corporate governance which specified that the tenure of a bank’s managing director or chief executive officer (CEO) can only last for a maximum of 12 years.
The CBN made the disclosure in a circular dated July 13, 2023, and signed by Chibuzo Efobi, director, financial policy and regulation department.
In February, the apex bank had ruled that executives can only serve a cumulative tenure of 20 years across the banking sector.
But in the circular, the CBN said the new rules supercede all previous codes, circulars and related directives on corporate governance issued by the CBN.
According to the financial regulator, the implementation of the new rules will come into effect by August 1, 2023.
The CBN said the new code fixes the tenure of deputy managing directors and executive directors (ED)of a bank at a maximum period of 12 years.
The apex bank directed that when an executive director becomes a deputy managing director, a cumulative tenure of 12 years applies and shall not be extended.
The code also specified that the minimum and maximum number of directors on the boards of commercial, merchant and non-interest banks (CMNIBS) shall be seven and 15 , respectively.
However, for a payment service bank (PSB), the minimum and maximum number of directors on the board shall be seven and 13.
The CBN said the board, subject to its approval, is to appoint the MD/CEO, executive directors as well as senior management staff.
“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 as MD/CEO,” the circular reads.
“Remuneration of MD/CEO, DMD, and EDs shall be linked to performance and structured to prevent excessive risk taking.
“The board shall approve a succession plan for the MD/CEO, other EDs and senior management staff, which shall be reviewed at least once every two years.”
The new policy added that not more than two members of an extended family shall be on the board of a bank.
“Only one member of an extended family can occupy the position of MD/CEO, chairman or ED at any point in time,” the circular reads.
“Where a merger, acquisition, take-over, or any form of business combination involves the appointment of a director from the board of the legacy institution, the length of service of such director shall include both the periods served pre and post combination.”
The CBN informed banks and financial holding companies to take note of the responsibilities imposed on their boards by the new rules.
