Credit risk

CBN announces effective date of credit risk regulations


Jun 04 (THEWILL) – The Central Bank of Nigeria (CBN) has mandated the registration of Other Financial Institutions (OFIs) in the Credit Risk Management System (CRMS).

In a circular posted on its website and signed by Chibuzo Efobi, director of the Financial Policy and Regulation Department, the CBN said the directive takes effect from August 1, 2022.

CRMS is the practice of mitigating losses by understanding the adequacy of a bank’s capital and loan loss reserves at a given time period, which enables the CBN and OFAs to follow any bank debtor to know if such debtor owes another institution.

OFIs include Development Finance Institutions (DFIs), Microfinance Banks (MFBs), Primary Mortgage Banks (PMBs), and Finance Companies (FCs).

The circular reads: “All OFl’s are hereby advised that the provisions of the Regulatory Guidelines for the Revamped Credit Risk Management System for Commercial, Merchant and Non-Interest Banks in Nigeria issued on 27th February 2017 (ref. FPR/DIR/GEN/CRM/06/012) and the additional regulatory guidelines for the operation of the redesigned CRMS published on September 10, 2018 (Ref N° FPR/DIR/GEN/CIR/07/007) have become applicable to all OFl.

“As a result, and more specifically, the application of Section 3.1(a) of the CRMS Guidelines which includes the requirement for ‘submission before disbursement’ is to begin on August 1, 2022.

Section 3.1(a) of the Regulatory Guidelines for the Operation of CRMS states that “Restitution on CRMS is required prior to disbursement of any loan or credit facility.

“This submission process does not interfere with a participating bank’s decision to extend a loan or credit to its customer. Therefore, restitution is only required after disbursement is approved.

The CBN has also reminded OFIs to ensure that all their client accounts comply with the 10-digit Uniform Bank Account Number of Nigeria (NUBAN) format and are tagged with a Bank Verification Number (BVN) or ID number. identification (TIN) for individuals and non-individual accounts of the account holder and profiled in the Customer Accounts Database (CAD) of the Nigeria Inter-Bank Settlement System (NIBSS) no later than June 20, 2022.

The apex bank said these were still prerequisites for registration with CRMS, warning that failure to meet the stipulated deadlines would result in appropriate penalties.