CBN restricts family members on bank’s board to two in new corporate governance guideline



Uba Group

The Central Bank of Nigeria, on Friday issued a new Corporate Governance Guideline to commercial, merchants, non-interest and payment service banks, as well as financial holding companies in the country, limiting the number of family members on their board to two.

The apex bank said in developing the guideline, it adapted relevant principles and recommended practices of the Nigerian Code of Corporate Governance issued by the Financial Reporting Council in 2018, global corporate governance practices as well as other related governance codes, circulars and directives made by the bank previously.

In a circular signed by Director, Finance Policy and Regulation Department, Chibuzo A. Efobi, the CBN said the new guideline which becomes effective from August 1, 2023 supersede all previous codes, circulars and related directives on corporate governance.

According to the CBN, “Not more than two members of an extended family shall be on the Board of a bank.”

‘Extended family’ according to the apex bank, includes the director’s spouse, parents, children, siblings, cousins, uncles, aunts, nephews, nieces, in-laws and any other construed relationship as may be determined by the CBN.

“Only one member of an extended family can occupy the position of Managing Director/Chief Executive Officer (MD/CEO), Chairman or Executive Director (ED) at any point in time,” the CBN said.

In line with the new directive, “Prospective and current directors on the Board of a bank are required to disclose potential and existing board memberships on boards of other organisations, as applicable, subject to CBN’s approval.”

In the case of a bank that is a subsidiary of a Financial Holding Company, the CBN said, “the aggregate number of directors from the subsidiaries shall not exceed thirty per cent (30%) of the members of the Board of the FHC and the number of directors on the Board of the FHC in the board of a subsidiary shall not exceed thirty per cent (30%).”

Other rules of engagement as contained in the document includes, “Interlocking or concurrent directorship by a director of a bank within its FHC or Group structure shall be limited to two institutions only.

“The position of an Executive Chairman or Vice Chairman shall not be recognised in the Board structure of any bank.

“In the event a director elects to resign his appointment on the Board of a bank, such director shall submit a written notice of resignation addressed to the Chairman of the board, ninety (90) days before the effective date of resignation,” the new circular explained.

On procedure for appointment of the board of financial institutions, the apex bank said the process must be formal, transparent, and documented in the Board Charter.

In addition, board members shall be appointed by the shareholders of the bank and approved by the CBN.

Board composition, the new guideline specified that, “The minimum and maximum number of directors on the Boards of Commercial, Merchant and Non-Interest Banks (CMNIBs) shall be seven (7) and fifteen (15) respectively. For a Payment Service Bank (PSB), the minimum and maximum number of directors on the board shall be seven (7) and thirteen (13).

“The Board shall consist of Executive and Non-Executive Directors. The number of Non-Executive Directors shall be more than Executive Directors on the Board and its Committees.

“The number of Independent Non-Executive Directors (INEDs) shall be at least: Three for: commercial banks with international and national authorization; merchant banks; and Non-Interest Banks (NIBs) with national authorization.

“Two for: PSBs; commercial banks with regional authorization; and NIBs with regional authorization.”


Meanwhile, publicly quoted financial institutions shall in addition apply the provisions of Companies and Allied Matters Act 2020, on the number of INEDs.

The expertise of ICT and cyber security as well as gender sensitivity also took prominence as the guidelines stated that, “At least two Non- Executive Directors (NEDs), one of whom shall be an INED, shall have requisite knowledge and experience in innovative financial technology, Information Communication Technology (ICT) and/or cyber security.

“In line with NCCG 2018, no Board of a bank shall consist of only one gender.

“To achieve gender diversity and promote a gender inclusive board, banks shall take a practical approach to women’s economic empowerment in line with Principle 4 of the Nigerian Sustainable Banking Principles.”

CBN said the new guideline is aimed at achieving three key objectives namely to provide additional guidance on the principles, recommended practices and responsibilities contained in the Nigerian Code of Corporate Governance (NCCG 2018); outline industry-specific corporate governance standards for banks; and promote high ethical standards amongst operators, whilst enhancing public confidence.