CBN directs banks to secure regulatory approval for CEOs’ successors 6 months early

*The Central Bank of Nigeria directs Domestic Systemically Important Banks to begin succession planning for their Managing Directors/Chief Executive Officers and other top executives, to strengthen corporate governance and minimise disruptions that could affect stability of the country’s financial system

Gbenga Kayode | ConsumerConnect

As part of veritable measures to strengthen corporate governance and minimise disruptions that could destabilise the country’s financial system, the Central Bank of Nigeria (CBN) has directed Domestic Systemically Important Banks (DSIBs), mandating early succession planning for their Managing Directors/Chief Executive Officers (MDs/CEOs), and other top executives.

ConsumerConnect reports the CBN instructed all DSIBs to obtain regulatory approval for a successor MD/CEO not later than six months before the expiration of the incumbent’s tenure.

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The latest directive to the banks, which takes immediate effect, is said to be an adjunct to Section 2.14 of the CBN’s 2023 Corporate Governance Guidelines for Commercial, Merchant, Non-interest, and Payment Service Banks.

Dr. Rita Sike, Director of the Financial Policy and Regulation Department at CBN, who disclosed this in a circular to the Deposit Money Banks (DMBs), noted that the financial institutions are also required to publicly announce the appointment of a successor in about three months before the outgoing MD/CEO officially exits office.

These guidelines emphasise that boards of financial institutions must establish succession plans for their MDs/CEOs, Executive Directors, and Senior Management to ensure leadership continuity and organisational resilience.

Role of DMBs ensuring Nigeria’s financial system stability

The Bankers’ Bank also highlighted the vital role of DSIBs in maintaining the stability of Nigeria’s financial system.

According to CBN, due to the sheer size of the DMBs, and interconnectedness in the financial ecosystem, they are considered very critical to fail.

The Bank noted that any disruptions in their leadership could have ripple effects across the Nigerian economy.

The circular further noted: “This requirement seeks to minimise disruptions at the top management level, enable top management appointees to prepare adequately for their new roles, and generally mitigate risks associated with abrupt changes in leadership.”

It is equally said that the directive to the commercial banks could help them to prepare leadership transitions well in advance.

The CBN emphasised this is aimed at averting uncertainties and reassure stakeholders, including consumers of financial products and services, bank customers, investors, and regulators, that Nigeria’s banking sector remains stable and resilient.

The directive, the banking sector regulator stated, reflects the CBN’s determination to align Nigerian banking practices with international best practices.

According to the Bank, sudden leadership exits, whether due to resignation, retirement, or unforeseen circumstances, often leave institutions vulnerable.

Therefore, with early regulatory approval and public announcements, the CBN believes banks will be better positioned to manage change seamlessly.

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