Credit risk

Enforcement of credit risk regulations to start on August 1, CBN tells OFIs

The Central Bank of Nigeria (CBN) has mandated the registration of other financial institutions (OFIs) in the Credit Risk Management System (CRMS).

CBN gave the directive in a recently published circular on its website and signed by Chibuzo Efobi, Director of the Department of Financial Policy and Regulation.

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.

With this, the CBN and OFIs would be able to track any bank debtor to find out if such a debtor owes another institution.

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

“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. No. RPF/ DIR/GEN/CRM/ 06/012) and the additional regulatory guidelines for the operation of the revamped CRMS issued on September 10, 2018 (Ref. No. FPR/DIR/GEN/CIR/07/007) became applicable to all OFl “, indicates the circular.

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

Section 3.1(a) of the regulatory guidelines for operating of the CRMS stipulates that “the restitution on the CRMS is required before the 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 apex bank has also reminded OFIs to ensure that all their customer accounts comply with the 10-digit Uniform Bank Account Number of Nigeria (NUBAN) format and are tagged with a Bank Verification Number (BVN) or tax identification number (TIN) for individuals and no. -individual accounts respectively of the account holder and profiled in the Nigeria Inter-Bank Settlement System (NIBSS) Industry Customer Accounts Database (CAD) no later than June 20, 2022.

“These remain prerequisites for enrollment in CRMS,” CBN said.

CBN further warned that failure to meet the stipulated deadlines will result in appropriate penalties.