CBN Threatens to Sack Bank Chairmen, CEOs for Late Account Filing

By Modupe Gbadeyanka

Chairmen and CEOs of banks operating in Nigeria have been warned that they risk being removed if they fail to file their financial statements 12 months after the close of the financial year.

This threat was given by the Central Bank of Nigeria (CBN) in a circular titled ‘Monetary, Credit, Foreign Trade and Exchange Guidelines for Fiscal Years 2018/2019.’

The monetary policy circular number 42 signed by the CBN Governor, Mr Godwin Emefiele, noted that, “In accordance with the provisions of BOFIA 1991 (as amended), banks are required, subject to the written approval of the CBN, to publish not later than four months after the end of each financial year, their audited financial statements (statement of financial position and statement of comprehensive income) in a national daily newspaper printed and circulated in Nigeria.

“To facilitate the implementation of consolidated supervision, all banks, discount houses and their subsidiaries shall continue to adopt December 31, as their accounting year end.”

The apex bank that if banks fail to publish their accounts for a period of 12 months after the end of the financial year, it would “hold the Board Chairman and Managing Director (MD) of a defaulting bank directly responsible for any breach and impose appropriate sanctions which may include barring the MD or his/her nominee from participation in the Bankers’ Committee and disclosing the reason for such suspension.”

The central bank said apart from that, it may suspend the “foreign exchange dealership license of the bank and its name sent to the Nigerian Stock Exchange (NSE), in the case of a public quoted company” and remove the Chairman and MD from office.

On the determination of banks’ cost of funds, the circular noted that lenders “shall continue to employ the weighted average cost of funds methodology in the computation of their cost of funds.

According to the CBN, the applicable cost items shall include interest cost on the different types of deposit liabilities, borrowings from the interbank funds market, payments in respect of deposit insurance premium and costs due to reserve requirements.

“It should be noted that overhead costs are excluded from this computation,” the circular obtained by Business Post stressed.

The CBN urged banks to seek profitability by driving down cost and charging competitive rates instead of charging excessive rates of interest.

It advised them to develop and implement a Risk-Based Pricing Model in line with the provisions of CBN circular referenced BSD/DIR/GEN/RPN/04/120 on ‘The Need for banks to develop and implement a risk-based pricing model’ issued in October 2011, noting that it will continue to maintain and upgrade the Real-Time Gross Settlement (RTGS) System for settlement of inter-bank fund transfers and time-critical payments and categorise banks into settlement and non-settlement banks for the purpose of clearing and settlement.

The settlement banks are to participate directly in the clearing houses and receive their net clearing position in their settlement account with the CBN while non-settlement banks receive their net clearing position through the settlement account of their settlement bank.

“Any bank applying for direct participation as a settlement bank will be required to possess  the capacity to provide the required clearing collateral of N15 billion, subject to periodic review. Such lender will also have ability to offer agency facilities to other banks and to clear and settle on their behalf and have adequate branch network, in all the CBN locations,” it said.