Contact Us: : +2349022514760
Q: Who Does the Code Apply To
A: The new Corporate Governance Code, known as the “Corporate Governance Guidelines for Commercial, Merchant, Non-Interest and Payment Service Banks in Nigeria,” applies to:
- Commercial Banks in Nigeria (CB)
- Merchant Banks in Nigeria (MB)
- Payment Service Banks in Nigeria (PSB)
- Non-Interest Banks in Nigeria (NIB)
These guidelines replace previous sectoral codes and provide comprehensive governance principles for the mentioned banking institutions in the country.
Q: When will these guidelines take effect?
A: These guidelines will take effect from August 1, 2023.
Q: What is the bank’s responsibility regarding independent professional advice?
A: The bank must facilitate access to relevant independent professional advice for its directors and/or Board Committees.
Q: How are requests for independent professional advice handled?
A: Requests for independent professional advice by directors and/or Board Committees are a matter for Board consideration and approval. The Board must keep proper records of its decisions on such requests.
Q: What records should the Board keep regarding professional advice?
A: The Board should keep detailed records of the professional advice provided to the concerned director(s) when the request is granted.
MEETINGS OF THE BOARD AND ITS COMMITTEES
Q: How are the meetings of the Board and its Committees scheduled?
A: The schedule of meetings of the Board and its Committees must be approved by the Board ahead of each financial year.
Q: How often should the Board and its Committees meet?
A: The Board and its Committees should meet at least once every quarter to effectively perform their oversight function and monitor management’s performance. However, the Remuneration Committee, if standalone, should meet on a need basis, but at least once a year.
Q: How often should the Board meet with the ACE (Audit Committee Chairman)?
A: For an NIB, the Board should meet formally with the ACE at least once every quarter. For a commercial bank with an NIB window, the Board should meet formally with the ACE at least twice a year.
Q: Where should the meetings of the Board and its Committees be held?
A: The meetings of the Board and its Committees should be held at a specified location or virtually if physical meetings cannot be held.
Q: What is the required quorum for the meetings?
A: The quorum for the meetings of the Board and its Committees should be two-thirds of members, with the majority being Non-Executive Directors (NEDs).
Q: What is the attendance requirement for Directors?
A: Every Director is required to attend all meetings of the Board and its Committees that they are a member of. To qualify for reappointment, a Director must have attended at least two-thirds of all Board and its Committee meetings.
Q: How should the minutes of the meetings be documented?
A: Minutes of meetings of the Board and its Committees should be properly written in English, adopted by members, and signed off by the Board/Board Committee Chairman and Company Secretary. They should be pasted in the minutes book and kept at the bank’s Head Office.
BOARD COMMITTEES
Q: How should the terms of reference and composition of Board Committees be determined?
A: The terms of reference and composition of Board Committees should be set out in the board-approved charter for each committee.
Q: How often should the membership of Board committees be reviewed?
A: The membership of Board committees should be reviewed and refreshed at least once every three years.
Q: Who should chair the Board committees?
A: All Board committees should be chaired by Non-Executive Directors (NEDs). However, the Board Audit Committee (BAC), Board Nomination and Governance Committee (BNGC), and Board Remuneration Committee (BRC) should be chaired by Independent Non-Executive Directors (INEDs).
Q: What qualifications should the Chairman of the BNGC of an NIB have?
A: The Chairman of the BNGC of an NIB should be knowledgeable and experienced in Islamic Finance or Islamic Commercial Jurisprudence.
Q: Are there any additional committees required for specific types of banks?
A: Yes, for CMNIBs, a Board Credit Committee (BCC) with oversight responsibility on credit matters should be established. For PSBs, in addition to the mandatory Committees, a Board Committee responsible for Information & Communication Technology (ICT) and Cybersecurity should be established.
Q: Should the names of the mandatory Committees be maintained exactly as stated?
A: Yes, banks should maintain the exact names of each of the mandatory Committees stated in the guidelines, and if two or more Committees’ functions are combined, the name of the combined committee should reflect the roles or functions.
Q: Can the Chairman of the Board attend Board Committee meetings?
A: No, the Chairman of the Board should not be in attendance, by invitation or otherwise, in any of the Board Committee meetings.
Q: Can the MD/CEO, DMD, and EDs attend meetings where remuneration of EDs will be discussed?
A: No, the MD/CEO, DMD, and EDs should not be in attendance, by invitation or otherwise, at any meeting of the Board or its Committees where the remuneration of EDs will be discussed.
Q: Can the functions of the Board Risk Management Committee (BRMC) and the Board Audit Committee (BAC) be combined?
A: The functions of the BRMC and the BAC should not be combined for CMNIBs. However, at least one NED on the Board of the bank should be a member of both Committees concurrently.
Q: How should the Chairman of each Board Committee be appointed?
A: Members of each of the Board Committees should appoint one of its members as Chairman.
Q: Are sub-committees of Board committees allowed?
A: No, the establishment of sub-committees of Board committees is prohibited.
Board Audit Committee
Q: Who should be part of the Board Audit Committee (BAC)?
A: The BAC should consist of Non-Executive Directors (NEDs) only.
Q: What qualifications should the members of the BAC have?
A: All members of the BAC should be able to read and understand financial statements. At least one member should have relevant professional qualifications and experience in financial and accounting matters.
Q: Are there specific qualifications required for BAC members in CMNIBs and PSBs?
A: In CMNIBs, at least one member of the BAC should be knowledgeable in innovative technology, ICT, and/or cybersecurity. In PSBs, the majority of the BAC should be knowledgeable in innovative technology, ICT, and/or cybersecurity.
Q: What qualifications should the BAC member have for an NIB?
A: In the case of the BAC for an NIB, at least one member should be an INED with relevant qualification, knowledge, and experience in Islamic finance or Islamic commercial jurisprudence.
Q: What access does the BAC have to the bank’s financial records?
A: The BAC should have unrestricted access to the financial records of the bank, including the External Auditors’ reports.
Q: Can the Board replace BAC members and External Auditors simultaneously?
A: No, the Board should not replace members of the BAC and External Auditors at the same time.
Q: What are the responsibilities of the BAC?
A: The BAC should review the integrity of the bank’s financial reporting and ensure the independence of the External Auditors.
Board Risk Management Committee
Q: Who should chair the Board Risk Management Committee (BRMC)?
A: The BRMC should be chaired by a Non-Executive Director (NED), and its composition should include at least two NEDs and the Executive Director (ED) in charge of risk management.
Q: Are there specific qualifications required for BRMC members in NIBs and commercial banks with an NIB window?
A: In the case of an NIB, the BRMC should be chaired by a NED, and at least one of the NEDs should have relevant qualification and experience in Islamic finance or Islamic Commercial Jurisprudence. In the case of a commercial bank with an NIB window, at least one NED in the BRMC should have relevant qualification and experience in Islamic finance or Islamic Commercial Jurisprudence.
Q: What qualifications should the Head of the NIB window have?
A: The Head of the NIB window of a commercial bank should be a senior management staff with knowledge and experience in the field of Islamic finance or Islamic Commercial Jurisprudence.
Q: What is the requirement for board evaluation?
A: The board, its committees, chairman, and individual directors must undergo an annual appraisal covering all aspects of their structure, composition, responsibilities, processes, and relationships.
Q: What is the requirement for appraisal in the case of NIBs?
A: In the case of NIBs (Non-Interest Banks), there must be an annual appraisal of the ACE (Board’s Audit Committee of Experts) covering all aspects of its responsibilities, processes, meetings, and overall functions.
Q: Who should conduct the appraisals?
A: The appraisals in both cases (for board and NIBs) should be conducted by an independent external consultant with experience, knowledge, and competence in corporate governance and performance management. For NIBs, the consultant should also have knowledge and experience in Islamic Finance or Islamic Commercial Jurisprudence.
Q: What should the board evaluation exercise cover?
A: The board evaluation exercise should, at a minimum, cover the scope described in the existing CBN Guidelines for Annual Board Evaluation by External Consultants of Banks and Other Financial Institutions in Nigeria.
Q: When should banks submit the evaluation reports?
A: Banks should submit the report of the annual evaluation of the board and ACE by the independent external consultant to the Director of the Financial Policy and Regulation Department (FPRD), CBN, no later than May 31st following the end of every financial year or before the Annual General Meeting where the report for the period/year is to be considered, whichever comes first.
Q: What is the consequence of continuous unsatisfactory performance by a director?
A: Continuous unsatisfactory performance by a director can be a basis for non-renewal of that director’s tenure.
GENERAL MEETINGS
Q: What is the responsibility of the Board regarding the venue of a general meeting?
A: The Board is responsible for ensuring that the venue of a general meeting is convenient and easily accessible to the majority of shareholders.
Q: Can the venue of general meetings be rotated?
A: Yes, the Board may consider rotating the venue of general meetings if it will promote better access for the majority of shareholders.
Q: Is it possible for banks to hold virtual general meetings?
A: Yes, banks are allowed to hold their general meetings virtually when physical meetings are not feasible.
Risk Management
Q: What should the Enterprise Risk Management (ERM) Framework of a bank describe?
A: The ERM Framework should clearly describe the roles and responsibilities of the Board, BRMC, ED Risk, Chief Risk Officer (CRO), senior management, and internal control function.
Q: What are the qualification and experience requirements for the head of the risk management function?
A: The qualification and experience of the head of the risk management function should be in accordance with the Guidelines on competency and fit and proper persons for the Nigerian banking sector.
Q: Who should head the risk management function?
A: The risk management function should be headed by an Executive Director (ED). However, for NIBs with regional authorization and PSBs, a senior management officer with relevant qualifications, competence, and experience can head the function.
Q: To whom should the Chief Risk Officer (CRO) report?
A: The CRO, who should hold at least the rank of an Assistant General Manager, should report to the ED Risk, who, in turn, reports to the Board.
Q: How often should the Board review the implementation of risk management policies and procedures?
A: The Board should review the effectiveness of the implementation of risk management policies and procedures at least annually.
Q: How often should the ERM Framework be reviewed?
A: The Board should review the ERM Framework at least once every three years.
Q: What disclosure requirements exist for banks regarding risk management policies?
A: Banks should disclose a summary of their risk management policies in their annual financial statements. Publicly quoted banks should host such summaries on their websites.
Internal Audit Function
Q: Can a bank outsource its internal audit/compliance functions?
A: No, a bank is not allowed to outsource its internal audit/compliance functions.
Q: What are the qualification and experience requirements for the head of internal audit?
A: The qualification and experience of the head of internal audit should comply with the Guidelines on competency and fit and proper persons for the Nigerian banking sector.
Q: Who is responsible for appointing and removing the head of internal audit?
A: The Board, subject to approval from the Central Bank of Nigeria (CBN), is responsible for appointing and removing the head of internal audit.
Q: To whom should the head of internal audit report?
A: The head of internal audit, who should hold at least the rank of an Assistant General Manager, should report directly to the Board Audit Committee (BAC).
Q: How often should an independent external assessment of the internal audit function be conducted?
A: An independent external assessment of the effectiveness of the internal audit function should be carried out annually, and the report should be submitted to the Director of the Banking Supervision Department by May 31st following the end of each accounting year.
Internal Shariah Audit
Q: Who should head the internal shariah audit function in NIBs?
A: The internal shariah audit function in NIBs should be headed by an Internal Shariah Auditor (ISA) not below the rank of an Assistant General Manager. In commercial banks with NIB windows, the head of the internal shariah audit function should be at least a Manager.
Q: What is the role of the head of internal shariah audit?
A: The head of the internal shariah audit function should provide an independent assessment of the quality and effectiveness of the NIB’s internal control, risk management systems, and governance processes. They should also ensure overall compliance with the principles of non-interest banking.
Q: What are the responsibilities of the ISA?
A: The ISA should determine the scope of the shariah audit in consultation with the Audit and Compliance Committee (ACE). They should produce quarterly internal shariah compliant reports, which are to be submitted to the ACE and the BAC. The ISA is also responsible for determining and disbursing Non-Performing Investments (NPI) to charity, reporting on the disposal of NPI quarterly, and reporting directly to the BAC and indirectly to the ACE.
Q: Who is responsible for appointing and removing the ISA?
A: The Board, in consultation with the ACE and subject to CBN’s ratification, is responsible for appointing and removing the ISA.
Q: What is the cooling-off period for executives exiting the Board of a bank?
A: Executives exiting the Board of a bank either upon or prior to the expiration of their maximum tenure must serve a cooling period of two years before being eligible for appointment as a Non-Executive Director (NED) in the same bank, subject to applicable cumulative tenure limits.
Q: What is the cooling-off period for an executive of a bank appointed to the Board of its Financial Holding Company (FHC)?
A: If an executive of a bank is appointed to the Board of its Financial Holding Company (FHC) in any role, a cooling-off period of two years applies.
Q: Is it allowed to change the role of an Independent Non-Executive Director (INED) or an Audit Committee Member (ACE) within the same bank?
A: No, the transmutation of an INED or an ACE into any role within the same bank is not permitted.
Q: What is the cooling-off period for a Non-Executive Director (NED) before being eligible for an executive role in the same bank?
A: A NED must serve a cooling period of two years before being eligible for appointment in any executive role within the same bank.
Q: Is there a cooling-off period when a director in a bank is appointed to the Board of another bank or a Financial Holding Company (FHC) outside the bank’s group?
A: No, there is no cooling-off period when any director in a bank is appointed to the Board of another bank or an FHC outside the bank’s group.
Q: When does a cooling-off period apply when a director transitions from a bank to a sister subsidiary?
A: If a director from a bank transitions to a sister subsidiary and it results in a change of role, a cooling-off period of two years applies. However, there is no cooling-off period if there is no change of role.
Q: What is the cooling-off period for a member of the Financial Reporting and Audit Committee of the Bank (FRACE) before appointment as a director or member of an Audit Committee of any Non-Interest Financial Institution (NIFI)?
A: A member of FRACE must observe a cooling-off period of three years before taking up an appointment as a director or a member of an Audit Committee of any NIFI under the supervisory purview of the Central Bank of Nigeria (CBN).
Q: What are the tenure limits for auditors in a bank?
A: The tenure of auditors in a bank is a maximum period of ten consecutive years, subject to the rotation of the audit engagement partner at least once every five years. If an audit firm is reappointed by the same bank, a cooling-off period of ten consecutive years must be observed.
Q: What is the cooling-off period required between the retirement of an audit firm partner and their appointment to the Board of the same bank?
A: Subject to the approval of the CBN, there must be a cooling-off period of three years between the retirement of a partner from an audit firm currently auditing a bank and their appointment to the Board of the same bank.
Q: What is the cooling-off period for audit team members and bank staff involved in auditing the same bank?
A: A cooling-off period of three years must be observed before a member of an audit team who participated in auditing a bank can be employed by the same bank, or before a staff member of a bank can join an audit firm to audit the same bank.
Q: Under what circumstances can an audit firm provide audit services to a bank?
A: An audit firm cannot provide audit services to a bank if one of the bank’s senior/top management was employed by the firm and worked on the bank’s audit during the immediate past three years.
Q: Who is restricted from being appointed in any capacity in a bank until a cooling-off period is observed?
A: The Governor and Deputy Governors of the CBN, the MD/CEO and Executive Directors of the Nigeria Deposit Insurance Corporation (NDIC), and the departmental directors of the CBN and the NDIC are not eligible for appointment in any capacity in a bank until after a cooling-off period prescribed by the respective Board of the CBN or NDIC.
Q: What is the cumulative tenure limit for directors on the Board of the same bank?
A: The cumulative tenure limit for directors (ED, DMD, MD, and NEDs) on the Board of the same bank is twenty-four years, calculated from the date of their first appointment.
Q: Is there a requirement for formal induction and continuing education for new directors?
A: Yes, a formal induction program for new directors must be conducted within three months of their appointment. The Board is responsible for approving an annual budget for training and continuing education for directors and ensuring its proper implementation.
Remuneration
Q: What is the requirement regarding the development of a remuneration policy?
A: The board is required to develop a remuneration policy, which should be disclosed in the annual report.
Q: How should executive and board remuneration be aligned?
A: Banks should align executive and board remuneration with the long-term interests of the bank and its shareholders.
Q: What is the purpose of remuneration by banks?
A: Remuneration by banks should be sufficient to attract, retain, and motivate staff. However, it should be balanced against the bank’s interest to avoid excessive remuneration.
Q: Who has the authority to approve remuneration?
A: The board is responsible for approving the remuneration of the Managing Director/CEO, Deputy Managing Director, Executive Directors, Senior Management, and other employees. However, the fees and allowances for Non-Executive Directors (NEDs) are fixed by the board and approved by shareholders at a General Meeting.
Q: What is the scope of remuneration for NEDs?
A: NEDs’ remuneration is limited to director’s fees, sitting allowances for board and committee meetings, and reimbursable travel and hotel expenses. They should not receive benefits, salaries, or any other allowances except those mentioned.
Q: How should the remuneration of MD/CEO, DMD, and EDs be structured?
A: The remuneration of the Managing Director/CEO, Deputy Managing Director, and Executive Directors should be linked to performance and structured to prevent excessive risk-taking.
Q: What should the board ensure regarding stock options?
A: If stock options are adopted as part of executive remuneration, the board should ensure that they are not priced at a discount.
Q: What is the requirement for share options tied to performance?
A: Share options should be tied to performance and require approval from shareholders at an Annual General Meeting (AGM). They should not be exercisable until one year after the expiration of the director’s tenure.
Q: What is the annual requirement regarding the remuneration policy?
A: At the end of each financial year, the board should confirm that the implementation and execution of the remuneration policy have achieved their objectives.
Code Governance banks Nigeria Code Governance banks Nigeria Code Governance banks Nigeria Code Governance banks Nigeria Code Governance banks Nigeria Code Governance banks Nigeria Code Governance banks Nigeria Code Governance banks Nigeria
