EFCC warns banks against issuing loans without collateral

The Economic and Financial Crimes Commission has cautioned Nigerian banks against granting loans without credible collateral, warning that such practices expose depositors’ funds to risk and often serve as a gateway for insider abuse.

EFCC Executive Chairman Ola Olukoyede issued the warning when the Chief Audit Executive of First Bank Plc, Mufutau Olawale Abiola, led a delegation on a courtesy visit to the Commission’s Lagos Zonal Directorate 2 in Ikoyi.

Speaking through the Acting Zonal Director, ACE 1 Bawa Usman Kaltungo, Olukoyede expressed concern over lending practices in which loans are backed solely by personal guarantees, including those of chief executives, describing such arrangements as wholly inadequate.

“Top-down loans are not secured. You cannot give a loan based solely on the personal guarantee of the Chief Executive. This is not security. Banks must not issue loans without verifiable collateral. If there is proper collateral for loans obtained by bank customers, this will reduce the rate of non-performing loans,” he said.

The EFCC chairman stressed that a bank is merely a custodian of depositors’ funds, and that extending loans without adequate collateral amounted to tampering with those funds. He also urged banks to conduct thorough due diligence on customers and insisted that even where such checks are outsourced, liability clauses must be built into the arrangement.

Olukoyede further called on banks to cooperate fully with the Commission during investigations, particularly in cases involving suspected insider connivance, by releasing staff promptly when invited.

“We must work together to stay ahead of criminals,” he said, adding that the Commission escalates cases to foreign security agencies where necessary.

Earlier, Abiola said the visit was aimed at strengthening collaboration between First Bank and the EFCC, and urged the Commission to expedite investigations involving the bank’s staff. He disclosed that a dedicated team within the bank handles requests from the Commission.