The Central Bank of Nigeria (CBN) has asked commercial banks to restrict loan defaulters, specifically large-ticket obligors, from accessing credit facilities.
A large ticket obligor is a borrower (an individual or
company) that owes a very large amount of money to a bank.
The CBN issued the directive in a circular to banks seen by
TheCable on Monday.
The latest instruction comes almost a week after the CBN
asked financial institutions to stress test.
It is uncertain if the two directives are connected or what
may have triggered the loan-related instruction, but the apex bank said it
furthers its mandate to protect Nigeria’s financial system.
“In furtherance of its mandate to promote a sound financial
system, protect depositors, and enhance prudential compliance within the
banking sector, the Central Bank of Nigeria (CBN) hereby directs all banks to
restrict non-performing large ticket obligors, whose activities pose systemic
risk to the financial system, from accessing specified banking services,” the
circular reads in part.
“Any large-ticket obligor with a non-performing facility
recorded in the CRMS and/or any licensed private credit bureau shall not be
granted additional credit facilities. For the purpose of this restriction,
credit facilities include loans and other forms of direct credit.
“In addition, such obligors shall not be granted banking
facilities or contingent liabilities such as bankers’ confirmations, letters of
credit, performance bonds, or advance payment guarantees.”
On strengthening collateral coverage, the CBN asked
financial institutions to obtain additional realisable collateral from such
obligors to adequately secure existing exposures.
The CBN said large ticket obligors are borrowers whose
exposures are as defined under Clause 3.2 (d) of the prudential guidelines for
deposit money banks in Nigeria 2010, or a customer with a combined exposure
across banks, as shown in the credit risk management system (CRMS), and/or as
shown in the reports of a licensed private credit bureau, “that exceed the
Single Obligor Limit (SOL), which materially affect a bank’s Capital Adequacy
Ratio (CAR) or otherwise pose a systemic risk to the financial system”.
“This directive reinforces earlier measures, particularly
the circular titled “Prohibition of Loan Defaulters from Further Access to
Credit Facilities in the Banking System” issued on June 30, 2014 (Ref:
BSD/DIR/GEN/LAB/07/015). This is to ensure consistency and effectiveness in
curbing credit abuse by large-ticket obligors,” the circular further reads.
The regulator said it will monitor compliance with the
directive to ensure consistent implementation across the banking industry.
The CBN warned that noncompliance would attract appropriate
regulatory sanctions in line with the provisions of the Banks and Other
Financial Institutions Act (BOFIA) 2020.
Nigerian banks are undergoing a recapitalisation programme,
slated to end by March 31.
So far, about 30 banks have met the minimum capital
requirements announced in March 2024.
Advertise on NigerianEye.com to reach thousands of our daily users
No comments
Post a Comment
Kindly drop a comment below.
(Comments are moderated. Clean comments will be approved immediately)
Advert Enquires - Reach out to us at NigerianEye@gmail.com