CBN Orders Banks, DSIBs to Seek Approval For New CEO

The Central Bank of Nigeria (CBN) has issued a directive mandating all banks and financial institutions classified as Domestic Systemically Important Banks (DSIBs) to seek regulatory approval for the appointment of new Managing Directors/Chief Executive Officers (MD/CEOs) well in advance.

According to the directive, such approval must be obtained “no later than six months before the expiration of the tenure of the incumbent chief executive.”

In a circular titled FPR/DIRIPUB/CIRI001/007 and signed by Dr. Rita I. Sike, Director of the Financial Policy and Regulation Department, the apex bank also instructed that the “appointment of their successor MD/CEO” be publicly disclosed “not later than three months before the planned exit of the sitting chief executive.”

This new directive is anchored in Section 2.14 of the Corporate Governance Guidelines for Commercial, Merchant, Non-Interest, and Payment Service Banks in Nigeria, 2023, which requires financial institutions to develop and endorse succession plans for top executives, including MD/CEOs, executive directors, and senior management personnel.

As outlined in the circular, the aim of the directive is to mitigate the potential disruptions linked to sudden changes in leadership at critical financial institutions.

“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,” the circular explained.

Highlighting the pivotal role of DSIBs in the country’s financial architecture, the CBN emphasized that solid succession planning is essential to maintain market confidence and ensure institutional resilience.

“In recognition of the critical role that Domestic Systemically Important Banks (DSIBs) play in sustaining financial system stability, the CBN hereby reiterates the importance of effective succession planning in these institutions,” the document stated.

Often described as “too big to fail,” DSIBs are entities whose collapse could pose severe threats to the broader economy.

The CBN reiterated that seamless leadership transitions are vital to safeguarding depositors, investors, and the integrity of the entire financial system.

Analysts believe the move will enhance transparency and accountability in leadership transitions, while affording regulators adequate time to vet proposed candidates for the top roles.

With this step, the CBN is reinforcing its regulatory authority and aiming to bolster governance frameworks within the nation’s most influential financial institutions.