Trending 
The Central Bank of Nigeria (CBN) has directed commercial banks to block loan defaulters, particularly large-ticket borrowers, from accessing new credit facilities within the banking system.
The directive was contained in a circular issued to banks and seen by Vanguard on Friday.
The apex bank said the move is an effort to safeguard the country’s financial system and strengthen prudential compliance in the banking sector.
A large-ticket obligor is an individual or company that owes a substantial amount to a financial institution.
According to the CBN, borrowers with non-performing loans recorded in the Credit Risk Management System (CRMS) or by any licensed private credit bureau will no longer be eligible for additional credit facilities.
The circular reads in part, “In 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.
“Any 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.
“In addition, such obligors shall not be granted banking facilities or contingent liabilities such as bankers’ confirmations, letters of credit, performance bonds, or advance payment guarantees.”
The CBN also instructed banks to strengthen collateral coverage for existing exposures by obtaining additional realisable collateral from affected borrowers.
The regulator explained that large-ticket obligors include borrowers whose exposures exceed the Single Obligor Limit (SOL) or those whose combined exposures across banks materially affect a bank’s Capital Adequacy Ratio (CAR) or pose systemic risk to the financial system.
“This directive reinforces earlier measures, particularly the circular titled “Prohibition of Loan Defaulters from Further Access to Credit Facilities in the Banking System” 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,” the circular further reads.
CBN said it will closely monitor compliance with the new directive across financial institutions and warned that banks that fail to comply will face sanctions in line with the provisions of the Banks and Other Financial Institutions Act (BOFIA) 2020.
