Central Bank Dissolves Boards of Union, Polaris, and Keystone Banks in Compliance Crackdown

The Central Bank of Nigeria (CBN) took decisive action on January 10, 2024, dissolving the boards and management of Union Bank, Keystone Bank, and Polaris Bank (collectively, the "Affected Banks"). This drastic move stems from the banks' alleged non-compliance with regulatory requirements and corporate governance failures, as outlined in the Banks and Other Financial Institutions Act, 2020 (BOFIA).

Specifically, the CBN identified violations related to the sections highlighted below, resulting in the immediate dissolution of the boards of the Affected Banks.

  • Section 12(c): non-compliance with the conditions under which their licences were granted
  • Section 12(f): involvement in any situation, circumstance, action or inaction that threatens  financial stability
  • Section 12(g): failure to comply with the Act or any other directives and regulations issued under the Act
  • Section 12(h): In the opinion of CBN, the bank is critically undercapitalised  with  a capital adequacy ratio below the prudential minimum or such other ratio as prescribed by the CBN

This action underscores the CBN's commitment to upholding financial stability and ensuring the public's trust in the banking system

Previous Similar Occurrences

This is not the first time such an action has occurred; recall that in 2021, the CBN took similar decisive action by dismissing the entire board of First Bank of Nigeria and First Bank of Nigeria Holdings PLC on allegations of bad credit, non-performing insider loans, and corporate governance malpractices.

Notably, a similar intervention occurred in 2016 when the CBN removed the board and management of Skye Bank PLC on the grounds that the bank failed to meet the minimum thresholds in critical prudential and adequacy ratios established by the CBN Prudential Guidelines for Deposit Money Banks in Nigeria. Eventually, in 2018, Skye Bank PLC's banking licence was revoked, and this necessitated the establishment of  Polaris Bank Limited as a bridge bank, taking on the assets and certain liabilities of the now-defunct Skye Bank PLC.

Building on this historical backdrop, the recent decision by the CBN to dissolve the boards and management of Union Bank, Keystone Bank, and Polaris Bank echoes a pattern of regulatory interventions to ensure the stability and integrity of the Nigerian banking sector. The CBN's actions underscore its commitment to upholding prudent financial practices and governance standards.

Who can remove the directors of a company?

Generally, the Companies and Allied Matters Act (CAMA) 2020 which serves as the governing law for all registered companies in Nigeria, makes provisions for the removal of a director from a company. In addition, the BOFIA, the regulatory framework for banks and financial institutions in Nigeria, specifically addresses provisions related to banks in this regard. Both regulations prescribe the processes and delineate the authorities responsible for the removal of boards in companies, with the BOFIA having a specific focus on the banking sector.

Removing a Director under CAMA 2020

CAMA 2020 specifically outlines the process for removing a company's director, emphasising that removal can only be achieved through an ordinary resolution passed by the company. This is after the preconditions have been met;

  1. A special notice has been issued convening a meeting, clearly stating that removing a director(s) forms part of the agenda.
  2. The notice must be sent to the affected director, regardless of their membership status in the company, giving the director the ability to exercise his right to respond to the removal notice through written representation, oral presentation, or both and also ample time to prepare and exercise his right to be heard  at the meeting when the resolution regarding their removal is considered.

Can CBN do this? - Stance of the BOFIA

While CAMA 2020 generally governs director removal in Nigerian companies, a special case exists for banks. CAMA in section 288(6) clearly acknowledges alternative removal powers outside its provisions, and Section 53(2) BOFIA strengthens this provision by providing that BOFIA provisions to supersede conflicting CAMA sections in banking matters. This means the Central Bank of Nigeria (CBN) can legally remove bank directors by the provisions of BOFIA, even if it contradicts CAMA's Section 288 procedures.

Specifically, Section 34(2) (e) and (f) (i) of BOFIA grants the CBN Governor the power to remove bank directors under certain circumstances, section 33 further provides that the CBN Governor can remove directors if the examination reveals a "grave situation" within the bank. Importantly, the reasons for removal must be documented in writing, with the removal taking effect on a specific date specified in the order.

This exception to CAMA's removal process for bank directors reflects banks' crucial role in Nigeria's financial stability. The CBN's swift and decisive action is necessary to protect depositors and the wider financial system.

Two key court cases underscore the CBN’s authority to intervene in troubled banks and remove their directors in critical situations.

In Omoyeni v. CBN & Ors, the Court of Appeal affirmed that Sections 33, 35, and 55 of the BOFIA together grant the CBN Governor the power to remove and replace directors/officers of banks deemed to be in a "grave situation."

Notably, the 2011 case of Danson Izedonmwen & Anor v. Union Bank PLC & Anor further solidified this point. When Union Bank faced difficulties in 2009, the CBN removed its directors. Challenging this move, the directors lost their case in the Federal High Court and the Court of Appeal. The appellate court confirmed the CBN's authority to remove and appoint directors of failing banks under sections 33 and 35 of BOFIA 2004 (now 33 and 34 in BOFIA 2020).

What unfolds next for the Affected Banks?

Following the CBN's dissolution from the boards of the Affected Banks, interim management was appointed to oversee the operations and activities of the affected banks. What unfolds next for the Affected Banks is crucial for their stakeholders and the broader financial landscape. The appointment of interim management to oversee the Affected Banks' operations signals a proactive stance by CBN, emphasising the need for swift corrective measures and a commitment to restoring public trust.

Following the dismissal by the CBN, Fitch Ratings has placed Union Bank of Nigeria PLC (UBN) on Rating Watch Negative (RWN), attributing this decision to the prevailing uncertainty surrounding the CBN's intervention, the possibility of further regulatory measures, and the adverse effects on UBN's standalone credit profile. Fitch Ratings intends to resolve the RWN status within 6 (six) months, contingent upon gaining clearer insights into CBN's intervention and its implication on UBN's standalone credit profile.

Other potential developments for the Affected Banks may include;

  • Appointment: Appointment of new members of the board in lieu of those who were dismissed.
  • Legal Implications: The alleged violations under BOFIA may carry legal consequences for the Affected Banks. Potential penalties or legal actions could follow due to non-compliance with the regulatory framework.
  • Investigation: The CBN may thoroughly investigate the reasons behind the dismissal and the issues cited, such as non-compliance with regulatory requirements, aiming to identify the root causes and implement corrective measures.
  • Reorganisation or Restructuring: CBN may require Affected Banks to undergo a reorganisation or restructuring. This could involve changes to the organisational structure, business practices, or even the bank's ownership.
  • Recapitalisation: CBN may require the Affected Banks to raise additional capital to meet regulatory requirements.
  • Implementation of Corrective Measures: CBN may require the Affected Banks to implement specific corrective measures to address the identified issues. These measures could include improvements in corporate governance, risk management, and compliance with regulatory requirements.

What does this mean for the clients of the Affected Banks?

CBN emphasises its commitment to upholding Nigeria's stable and robust financial system while assuring depositors that their funds are safe and unaffected by the dismissal. Given this, the banking services at the Affected Banks can continue without significant disruptions. However, other anticipated developments may include the following;

  • Increased Regulatory Scrutiny: clients can anticipate heightened scrutiny and oversight from regulatory authorities to address the issues leading to the dismissal.
  • Changes in Banking Operations: the appointment of the new management may change the bank's practices, policies, and customer service. Clients may experience adjustments in how the bank operates to address regulatory concerns and improve overall governance.

Clients may benefit from resolving issues that led to the intervention, as regulatory actions are typically taken to address weaknesses in the Affected Bank's operations and governance.


The CBN’s directive signifies a deliberate effort to stabilise the financial sector and ensure compliance with the regulatory requirements imposed on banks to ensure a healthy financial climate, as such interventions are deemed crucial both for the banks and the stakeholders. It will be interesting to see how the interim management appointed by CBN will navigate the challenges and implement necessary changes within the Affected Banks to address the concerns prompting the CBN’s directive and steer the Affected Banks in alignment with CBN’s expectations.


  1. Section 282 (2) CAMA
  2. Section 288(3) CAMA
  3. (2015) LPELR-25789(CA
  4. (2011) LCN/4919(CA)
  5. Fitch Ratings is an international credit rating agency based in New York City and London.