By Omoh Gabriel, Business Editor
It is now mandatory for banks operating in the country to disclose in their report the credit approval limits of the board, board credit committee, management credit committee, managing Director, Group Heads, Corporate and retail banking. The new arrangement to be followed strictly by banks is that credit approval by the Board is from N 101 million and above; Board Credit Committee are now limited to grant approval of between N 51 million – N 100 million, Management Credit Committee are limited to credit approval ranging from N 26 million – N 50 million, Managing Director from N 11 million – N 25 million while Group Head, Corporate, Retail are left at approval levels of N 5 million РN 10 million.
According to the CBN “Approval limits are to be set by the Board of Directors and reviewed from time to time as the circumstances of the Group demand. Exposure to credit risk is also to be managed by banks through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations and by changing these lending limits where appropriate.
Some other specific control and mitigation measures are outlined by the CBN include the policy measure that all loan facilities granted by any of the banks should have been secured against Mortgages over residential properties; Charges over business assets such as premises, inventory and accounts receivable; Charges over financial instruments such as debt securities and equities.
The banks are to henceforth structures the levels of credit risk they undertake by placing limits on the amount of risk accepted in relation to one borrower, or groups of borrowers (single obligor limits), and to geographical and industry segments. Such risks are to be monitored on a revolving basis and subject to an annual or more frequent review, when considered necessary.
Limits on the level of credit risk by product, industry sector and by country are to be approved quarterly by the Board of Directors. The exposure to any one borrower including banks and brokers is further restricted by sub-limits covering on- and off-balance sheet exposures, and daily delivery risk limits in relation to trading items such as forward foreign exchange contracts. Actual exposures against limits are monitored daily.
According to Samuel A Oni Director Banking Supervision in a circular titled “Minimum Information to be disclosed in financial statements for the year ended December 31,2009 “These new measures are to enhance transparency and ensure standardisation in financial reporting by banks and discount houses, the CBN has developed guidelines on the minimum information to be disclosed by banks and discount houses in annual financial statements. Banks and discount houses are, therefore, required to adopt the new reporting format and ensure that published annual financial statements contain this information at the minimum, with immediate effect.
Also to be contained in the new minimum requirement of published accounts of banks is the inclusion that “The Bank was incorporated in Nigeria under the Companies and Allied Matters Act 1990 as a
private limited liability company on 28 May 1998. It was granted license on the 15 November
2001 to carry on the business of commercial banking and commenced business on 1 January
2002. The Bank was converted into a Public Limited Liability Company on 1 April 2002. The
Bank’s shares were listed on the 25 June 2002 on the floor of the Nigerian Stock Exchange. The principal activity of the Bank is the provision of banking and other financial services to corporate and individual customers. Such services include granting of loans and advances, corporate finance and money market activities. Its major subsidiaries carry on capital market, insurance and trusteeship businesses”.
Also being required of banks to disclose is the number of its subsidiaries, their identities etc. Also to be stated is the Corporate governance in place in line with the CBN code of Corporate governance as minimum disclosure.
It is also now required that all “Unrealised gains on transactions between the bank and its associates are eliminated to the extent of the bank’s interest in the associates. Unrealised losses are also to be eliminated unless the transaction provides evidence of an impairment of the asset transferred. Banks are to reflect in their report that Claims paid represent all payments made during the year, whether arising from events during that or earlier years. Outstanding claims should represent the estimated ultimate cost of settling all claims arising from incidents occurring prior to the balance sheet date, but not settled at that date. Outstanding claims are to be computed on the basis of the best information available at the time the records for the year are closed, and include provisions for claims incurred but not reported (“IBNR”). Provisions for unexpired risks are the estimated amounts required over and above provisions for unearned premiums to meet future claims and related expenses on businesses in force at the end of the accounting period
The apex bank directive also required that Interest receivables, from customers, where not debited to customers and material should be included in reported credit (if material and identifiable) while Interest received in advance (e.g. discount on Bills) from customers where already debited to customers but not yet earned, should be deducted from report credit (if material and identifiable). The directive stated that cash collateral against advances, if material and identifiable, should be disclosed separately
All the subsidiary companies were incorporated in Nigeria.
Include the reasons why the ownership, directly or indirectly through subsidiaries, of more than half of
the voting or potential voting power of an invester does not constitute control
Include commitment for minimum lease payments with a term in excess of one year Disclose any significant financing restrictions renewal or purchase options, contingent rentals and other
contingencies arising from leases, if applicable
