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

The Central Bank of Nigeria (CBN) has mandated the enrolment of other financial institutions (OFIs) on the credit risk management system (CRMS).

CBN gave the directive in a circular recently published on its website and signed by Chibuzo Efobi, director, financial policy and regulation department.

CRMS is the practice of mitigating losses by understanding the adequacy of a bank’s capital and loan loss reserves at any given period.

With this, the CBN and OFIs would be able to track any bank debtor to know 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 OFls are hereby informed that the provisions of the regulatory guidelines for the redesigned credit risk management system for commercial, merchant, and non-interest banks in Nigeria issued on February 27, 2017 (Ref No. FPR/DIR/GEN/CRM/06/012) and the additional regulatory guidelines for the operation of the redesigned CRMS issued on September 10, 2018 (Ref No. FPR/DIR/GEN/CIR/07/007) have become applicable to all OFls,” the circular reads.

“Accordingly, and more specifically, enforcement of Section 3.1(a) of the extant guidelines on CRMS that captures the ‘submit before disbursement’ requirement shall commence on August 1, 2022.”

Section 3.1(a) of the regulatory guidelines for the operation of CRMS states that “rendition on the CRMS is required before the disbursement of any loan or credit facility.

“This process of submission does not interfere with any participating bank’s decision to extend a loan or credit to its customer. Consequently, rendition is only required after approval to disburse is given.”

The apex bank also reminded OFIs to ensure that all their customer accounts comply with the 10-digit Nigeria uniform bank account number (NUBAN) format, and are tagged with bank verification number (BVN) or tax identification number (TIN) for individual and non-individual accounts respectively of the account holder and profiled on the Nigeria Inter-Bank Settlement System’s (NIBSS) industry customer accounts database (CAD) not later than June 20, 2022.

“These remain prerequisites for enrolment onto the CRMS,” CBN said.

CBN further warned that failure to comply with the stipulated timelines would attract appropriate sanctions.