Regulatory Alerts2009-03-02 | TED-FEM-FPC-GEN-01-028-09Circular on Insider-Related Credits and Reporting Requirements for All Operators and External Auditors of Microfinance Banks.
The Central Bank of Nigeria (CBN) issued a circular to all microfinance banks (MFBs) regarding insider-related credits, emphasizing that many MFBs are exposed to excessively high levels of these credits. This circular reminds directors, top management staff, and auditors about their responsibilities in managing and reporting on such credit facilities. It outlines several measures intended to curb potential excesses by directors and preserve the health of microfinance institutions. These include: 1. Insider-related credits cannot exceed stipulated limits and should not receive concessionary interest rates or be written off without CBN approval. 2. Directors must complete and execute a code of conduct, retain a copy in their personal files at the bank. 3. Heads of Internal Audit Departments must submit an internal audit report quarterly addressing seven key issues: insider-related credit schedules, non-performing credit schedules, credit policies and procedures, governance effectiveness, fraud and forgeries, risk management, and financial performance. 4. MFBs that fail to comply with these measures may be prohibited from declaring dividends until their level of insider-related credits is reduced to an acceptable level. 5. For non-performing director-related credits, directors will face consequences ranging from a letter of warning to the removal from the board and even being blacklisted.