Nine Banks Advance N226bn Insider-Related Loans In 2021

Nine Banks Advance N226bn Insider-Related Loans In 2021

INDICATIONS have emerged that nine Nigerian banks approved and granted a sum of N226.12 billion loans and advances to entities controlled by key management personnel and related parties in 2021.

This is according to the analysis of the banks’ 2021 financial accounts published on the Nigerian exchange

As directors, specifically, privileges which include reducing interest rates, longer loan tenors are given to key management including their close family members.

The banks are Unity Bank Plc, Wema Bank Plc, Access Holdings Plc, United Bank for Africa (UBA) Plc, Zenith Bank Plc, Guaranty Trust Holdiñgs Plc (GTCO), FCMB Group Plc, Fidelity Bank Plc and Sterling Bank Plc.

Bankers describe key management personnel as members of the Board of Directors of the bank, including their close members of the family and any entity over which they exercise control.

Close members of the family are those who may be expected to influence or be influenced by that individual in dealings with the bank.

Details from Sterling Banks’s 2021 full-year financials show that loans and advances transactions with key management personnel stood at N600 million, an increase of 60.4 per cent from N374 million in 2021.

The bank also published a full list of the directors and some employees, related entities’ loans which are worth over N2.4 billion.

According to Fidelity Bank’s financials, the bank granted over N194.33 billion in loans and advances to related parties as of the end of 2021, up 20.7 per cent from the N194.33 billion recorded in 2020.

Loans to entities controlled by key management personnel increased by 20.7 per cent to N96.6 billion in 2021 from N80.02 billion in 2020, according to the breakdown, while loans to related parties increased by 20.6 per cent to N97.73 billion in 2021 from N81.01 billion in the previous financial year.

Zenith Bank reported N1.69 billion loans and advances on insider-related transactions, an increase of 3.5 per cent from N1.63 billion in 2020.

Others are: Unity Bank – N5.35 billion in 2021, Access Bank- N268.2 million in 2021 from N2.23 trillion reported in 2020, Wema Bank- N589 million insider-related loans and advances in 2021 from N2.02billion reported in 2020. Stanbic IBTC Holdings- N39.86 billion, FCMB Group- N1.15 billion in 2021.

Meanwhile, analysts are concerned that with the rate of increase in insider-related loans, most of the lenders may be violating section 20 of the Banks and Other Financial Institutions Act (BOFIA).

According to the Act, a bank is not allowed to grant more than 20 per cent of its shareholders funds to any one person (natural person or corporate body) including the subsidiaries, associates and the related parties of such a person.

“A bank is also not allowed to grant loans: upon the security of its own shares; or permitted to be outstanding, unsecured advances in excess of N50,000.00 to its directors or to any firm or company in which either the bank itself, or any of its directors, is a director or guarantor or in which it or they maintain not less than five per cent of the shareholding; or allow to be outstanding to its employees, unsecured advances which exceeds one year’s emoluments.”