The Central Bank of Nigeria (CBN) has directed commercial banks to restrict loan defaultersâparticularly large-ticket obligorsâfrom accessing additional credit facilities in the banking system.
The directive was contained in a circular issued to banks on Monday as part of the apex bankâs efforts to safeguard the stability of Nigeriaâs financial system.
A large-ticket obligor refers to a borrowerâeither an individual or a companyâowing a significantly large sum of money to a bank.
According to the CBN, the directive aligns with its mandate to strengthen financial sector stability and protect depositors.
âIn 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,â the circular reads in part.
The apex bank stated that any large-ticket obligor with a non-performing facility recorded in the Credit Risk Management System (CRMS) or with any licensed private credit bureau must not be granted additional credit.
âAny 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,â the CBN said.
The regulator further directed that such obligors must also be denied other banking instruments and contingent liabilities.
âIn addition, such obligors shall not be granted banking facilities or contingent liabilities such as bankersâ confirmations, letters of credit, performance bonds, or advance payment guarantees,â the circular added.
To strengthen risk management within the sector, the CBN also instructed banks to obtain additional realisable collateral from such borrowers in order to adequately secure existing exposures.
The bank explained that large-ticket obligors are borrowers whose exposures are defined under Clause 3.2(d) of the prudential guidelines for deposit money banks in Nigeria (2010). This includes customers whose combined borrowing across banksâas reflected in the CRMS or in reports from licensed private credit bureausâexceeds the Single Obligor Limit (SOL) and could materially affect a bankâs Capital Adequacy Ratio (CAR) or pose systemic risks to the financial system.
The directive, according to the CBN, reinforces earlier regulatory measures aimed at curbing credit abuse within the banking system.
âThis directive reinforces earlier measures, particularly the circular titled âProhibition of Loan Defaulters from Further Access to Credit Facilities in the Banking Systemâ 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,â the circular stated.
The apex bank said it will closely monitor compliance with the directive to ensure uniform implementation across the banking industry, warning that violations would attract regulatory sanctions.
Non-compliance, it added, will be punished in accordance with the provisions of the Banks and Other Financial Institutions Act 2020 (BOFIA).
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