Regulatory Alerts2013-02-19 | BSD/DIR/GEN/LAB/06/003Review of Risk Weights on Certain Exposures in the Computation of Capital Adequacy
The Central Bank of Nigeria has revised risk weights for certain exposures in the computation of capital adequacy. Local Government direct lending risk weight is increased from 100% to 200%. State Government Bonds attract a 20% risk weight, with those that meet the eligibility criteria continuing to have zero per cent risk weight. For exposure to an industry sector exceeding 20%, the portfolio's risk weight becomes 150%. Single obligor limit breaches without prior CBN approval are now considered capital impairment. Banks' related parties within a holding company structure include financial holding companies and other subsidiaries within the group. Loans to FHC or credit from them are treated as liability or return of capital, respectively. Unsecured loans to subsidiaries within the group are deducted from the bank's capital when computing capital adequacy. All banks and discount houses must immediately comply with these directives.