CBN tightens rules on CEO succession for top banks

By Chinwendu Obienyi

The Central Bank of Nigeria (CBN) has issued a new directive mandating all Domestic Systemically Important Banks (DSIBs) to publicly announce the appointment of a new Managing Director/Chief Executive Officer (MD/CEO) at least three months before the scheduled exit of the incumbent.

In a circular signed by Dr Rita Sike, Director of Financial Policy and Regulation, and published on the CBN’s website, the bank stated that the new rules apply to Domestic Systemically Important Banks (DSIBs) – the largest lenders that are considered “too big to fail” because of their size and importance to Nigeria’s financial system.

“Consequently, and in line with good corporate governance practice, each DSIB is hereby required to: ensure it obtains regulatory approval for the appointment of a successor Managing Director not later than six months to the expiration of the tenor of the incumbent MD/CEO,” the circular stated.

Banks must also “publicly announce the appointment of the successor MD/CEO not later than three months to the planned exit of the incumbent MD/CEO.”

Whilst stating that the move is part of broader efforts to strengthen corporate governance and maintain confidence in the financial system, the CBN warned that leadership uncertainty at large banks could destabilise the entire financial sector and damage the wider economy.

The new rule draws from corporate governance guidelines issued in 2023, which require commercial, merchant, non-interest, and payment service banks to maintain strong succession plans for senior executives.

The policy “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 central bank said.

DSIBs play an outsized role in Nigeria’s financial system because of their scale, complexity, and connections with other institutions. A shock at one of these banks could ripple across financial markets, affecting depositors, shareholders, and the broader economy.