Banking Updates: Recent Landmark Regulations, Legislation & Case Law Affecting The Banking & Finance Sectors March 2017 Edition

Lately, the Nigerian banking landscape has been a beehive of activity. In the wake of  crises in the foreign exchange (“FX”) market, liquidity challenges, high incidence of non-performing loans (“NPLs”), poor corporate governance ratings, and increasing competition among banks fueled by cutting edge technologies among others; the banking and loan markets have been characterized by a very dynamic regulatory regime, driven by the Central Bank of Nigeria (“CBN”) and new innovative products and models, introduced by market participants such as banks and other financial institutions (“OFIs”) to keep pace with the changing market environment.

This newsletter brings to readers monthly, a synopsis of regulations, directives, case laws and legislation affecting the banking and loan segments of the Nigerian financial system. In this edition, focus is placed on some of the landmark regulations on credit risk management; FX; and accounting treatment for Micro, Small and Medium Enterprises (“MSME”)’s Development Fund. Also featured in this edition is a market bulletin issued in March by the FMDQ OTC Securities Exchange on how to access its OTC FX Futures through the OTC FX Forwards, as well as a review of the decision of the Court of Appeal in the case of UBA Plc. v Bakare Wasiu (2017) 4 NWLR (pt. 1555) 318 C.A. on the scope of the duty of care held by banks to their customers and the liability arising from Personal Identification Number (PIN) misuse. . Notably, there are no industry-specific legislative updates for the period under review.

GUIDELINES FOR THE OPERATION OF THE REDESIGNED CREDIT RISK MANAGEMENT SYSTEM (CRMS)

In a bid to strengthen credit appraisal mechanism and curtail the growing rate of defaults among borrowers in the financial services sector, the CBN issued the Regulatory Guidelines for the Operation of the Redesigned Credit Risk Management System (the “CRMS Guidelines”) for the banking industry. Introduced by a Circular referenced FPR/DIR/GEN/CRM/06/012 and addressed to all commercial, merchant and non-interest banks in Nigeria authorized to grant credit facilities or loans to customers, the CRMS Guidelines require banks to make rendition on the Credit Risk Management System (CRMS) before disbursement of loans to customers with effect from February 21, 2017. However, sanctions for any breach of the rendition requirements were to be delayed until April 3, 2017...

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