Tel: 09-46237401 E-mail:fprd@cbn.gov.ng CENTRAL BANK OF NIGERIA Financial Policy and Regulation Department Central Business District P.M.B. 0187 Garki, Abuja.

FPR/DIR/GEN/PAR/02/009 August 23, 2019 EXPOSURE DRAFT ON THE PRUDENTIAL GUIDEĽINES FOR DEVELOPMENT FINANCE INSTITUTIONS The Central Bank of Nigeria (CBN), in June 2010, issued the revised Prudential Guidelines to deposit money banks in Nigeria as part of its efforts at enhancing the quality of banks' assets. The need for sector-specific Guidelines has become apparent given developments which had specific impact on different classes of financial institutions over the years. Accordingly, the CBN hereby issues for observations and comments, the attached draft Prudential Guidelines for Development Finance Institutions. The Guidelines may be downloaded from the CBN website, www.cbn.gov.ng. We would be pleased to receive your comments by Friday, September 20, 2019. Soft copies of your presentation may be forwarded to pgofis@cbn.gov.ng.

Thanks.

KEVIN N. AMUGO DIRECTOR, FINANCIAL POLICY AND REGULATION DEPARTMENT CENTRAL BANK OF NIGERIA PRUDENTIAL GUIDELINES FOR DEVELOPMENT FINANCE INSTITUTIONS (DFIs) IN NIGERIA [AUGUST 2019] [1ST DRAFT OF PGS FOR DFIs - JUNE 2019]

1	Contents
1	RISK MANAGEMENT 4
1.1	Credit Policy 4
1.2	Credit Concentration Policy 5
1.3	Exposures to Directors and their Related Interests 5
1.4	Disclosure of Insider-related Credits 6
1.5	Lending Limits 6
1.6	Bankers Acceptances and Commercial Papers 7
1.7	Basic Information on Borrowers 7
1.8	Minimum Information on Credit Print-Outs 8
1.9	Management of Market Risk 9
1.10	Foreign Currency Borrowing 9
1.11	Liquidity Requirements 9
1.12	Maintenance of Statutory Reserves 10
1.13	Capital Adequacy Requirements 10
1.14	Restrictions on Declaration of Dividends 11
1.15	Credit Ratings 11
1.16	Policies and Procedures for Write-Off of Fully Provided Credit Facilities 11
1.17	Keeping of Proper Records 11
1.18	Other Known Losses 12
1.19	Implementation of Examination Report Recommendations 12
1.20	Revaluation of Fixed Assets 12
1.21	Permissible Investments and Restrictions 12

1

2	CODE OF CORPORATE GOVERNANCE 13
3	KNOW-YOUR-CUSTOMER AND ANTI-MONEY LAUNDERING MEASURES.14
3.1	Know Your Customer 14
3.2	Anti-Money Laundering Measures 14
3.3	Records Retention 14
3.4	Correspondent Banking 14
3.5	Suspicious Transactions 14
4	LOAN CLASSIFICATION AND LOSS PROVISIONING 16
4.1	Loan classification system for other than specialized loans 16
4.2	Classification of "Specialized loans" 18
4.3	Non-Performing Loans 22
4.4	Loan Loss Provisioning for other than specialised loans 22
4.5	Loan loss provisioning for specialised loans 23
4.6	Collateral Adjustment for lost Facilities 24
4.7	Treatment of IFRS Impairment Charge for Prudential Purposes 26
4.8	Credit Portfolio Disclosure Requirement 26
4.9	Interest Accrual 27
4.10	Classification and Provisioning for Other Assets 27
4.11	Facilities without Approval: 28
4.12	Off- Balance Sheet Engagements 28
4.13	Financial Soundness Indicators and Financial Ratios 30
4.14	Update of the Prudential Guidelines 30
4.15	Effective date 30

4.16	Annexure 1 .
4.17	Annexure 2
4.18	Annexure 3

2 Risk Management 2.1 Credit Policy

A. A DFI shall put in place a comprehensive credit policy duly approved by its board of directors.

B. The policy shall include the eligibility requirements for borrowers, the products offered, terms and conditions for granting loans/facilities, procedures for loan administration and disbursement, appropriate monitoring mechanism and set out the standards to be used to manage credit risk.

C. The policy shall also indicate the DFI's collateral requirements, including the types of qualifying collateral and the collateral coverage for each type of credit facility, if any, for the different types/classes of facilities.

D. Credit facilities shall be granted at non-preferential terms and conditions that are clearly disclosed, and at prices that reflect the credit risk.

E. A DFI's credit extensions, except for products that expressly allow for the sharing of credit risk, shall be secured according to the DFI's Collateral Policies.

F. A minimum of 80 per cent of a retail DFI's credit portfolio shall be extended to end users while same proportion of a wholesale DFI's credit portfolio shall be extended to eligible participating financial institutions (PFIs).

G. Investments in bankers' acceptances and commercial papers shall be treated as part of the loan portfolio.

H. The credit policy shall address lending to directors as part of lending to related parties.

I. A DFI's credit policy shall clearly state the conditions under which PFIoriginated loans are to be collateralized to be eligible for DFI financing or refinancing and the types and amounts of any such required collateral.

J. DFIs shall register all movable collaterals with the National Collateral Registry (NCR). Evidence of the NCR registration is a necessary part of the loan documentation.

K. A DFI shall have a Credit Portfolio Plan as part of its credit concentration policy, which shall consider the following, among others: i. The target market and portfolio size; ii. Macro-economic conditions, including fiscal and monetary policy guidelines; iii. Minimum risk acceptance criteria; iv. The credit concentration policy; v. Historical portfolio performance; L. A DFI shall review its credit portfolio plan on a quarterly basis to ensure that the plan is still reflective of current market conditions. In the event of adverse changes in the macro-economic environment or particular sectors, industries or regions, appropriate review and mitigation strategies shall be conducted.

M. The policy shall be reviewed at least every three (3) years.

2.2 Credit Concentration Policy

A. A DFI shall have a board-approved credit concentration policy, covering the different forms of credit risk concentration to which the DFI may be exposed. The policy shall include an effective system of internal controls to identify, measure, monitor and control credit risk concentration. Credit concentration to which a DFI may be exposed include: i. Significant exposure to an individual counterparty or group of related counterparties; ii. Credit exposure to counterparties in the same economic sector or geographic region; and iii. Indirect credit exposure arising from a DFI's Credit Risk Mitigation (CRM) activities (e.g. exposure to a single collateral type or to credit protection provided by a single counterparty).

B. The policy shall specify concentration limits and the methodology for calculating credit concentration. Limits should be defined in relation to a DFI's capital, credit portfolio, total assets or, other appropriate measures.

C. In defining the portfolio concentration limits for industries or sectors, DFIs shall adopt the Standard Industry Classification of Economic Sectors (SIC) issued by the CBN; D. A DFI's management shall conduct stress tests of its credit portfolio at least on a quarterly basis. The tests shall also consider the credit concentration risk. The management shall review the results of the tests and make adequate plans to respond to plausible adverse changes in market conditions.

E. In assessing credit risk concentration of a DFI, the CBN will consider the credit concentration policy, the credit portfolio plan and the extent to which the bank considers credit concentration as part of the subjective factors in making specific provisions. Non-compliance with a DFI's established policy on credit concentration and monitoring shall form a basis for supervisory action, which may include additional loan loss provisions.

2.3 Exposures To Directors And Their Related Interests

A. DFIs shall fully disclose their credit exposures to directors, significant shareholders and other insiders in their financial statements and returns prescribed by the CBN.

B. DFIs shall ensure that their credit policy specifically addresses lending to directors as part of lending to related parties.

2.4 Disclosure Of Insider-Related Credits

A. DFIs shall disclose all transactions involving shareholders, employees, directors and their related/connected interests. Insider-related credits include credits to shareholders, employees, directors and their related interests in their financial statements.

B. The disclosures required to be presented are as follows: (i) The aggregate amount of insider-related loans, advances and leases outstanding as at the financial year end shall be separately stated in a note to the accounts and the non-performing component further analysed by security, maturity, performance, provision, interest-in suspense and name of borrowers.

(ii) Notes to the accounts on commitments and other contingent liabilities shall also provide details of those arising from related-party transactions.

(iii) The external auditors and audit committees shall include in their report, their opinion on related-party credits.

C. The requirements of this section do not apply to credits extended to employees under their employment scheme of service, or to shareholders whose shareholding and related interests are less than 5 per cent of the bank's paid up capital as at the date of the financial report or to public limited liability companies in which a director has an interest that is less than 5 per cent.

2.5 Lending Limits

A. The maximum loan to any borrower or group of related borrowers shall be 20 per cent of the DFI's shareholders' funds unimpaired by losses.

B. A DFI shall not extend credit facility to any PFI or group of related entities which exceeds 50 per cent of the value of that PFI's shareholder's fund unimpaired by losses.

C. Aggregate large exposures of a DFI shall not exceed five (5) times the shareholders fund unimpaired by losses. Loans under a staff scheme are excluded but shall be in accordance with the conditions of service.

D. A large exposure is any credit to a customer or a group related borrowers that is at least 5% of a DFI's shareholders fund unimpaired by losses.

E. Where a PFI meets a wholesale-DFI's eligibility criteria and is a related party, the maximum credit to the PFI shall be lower of 1 per cent of the PFI's shareholders' funds unimpaired by losses or 1 per cent of the WDFI's shareholders' funds unimpaired by losses.

F. Where a borrower meets a retail-DFI's eligibility criteria and is a related party, the maximum credit to the borrower shall be 1 per cent of the RDFI's shareholders' funds unimpaired by losses.

G. The aggregate insider related credit shall not exceed 5 per cent of the DFI's shareholders' fund unimpaired by losses.

H. A director or a significant shareholder shall not borrow more than 1 per cent of shareholders' funds unimpaired by losses.

I. The aggregate credit facilities to all insiders and their related parties shall not exceed 10 per cent of shareholders' funds.

2.6 Bankers Acceptances And Commercial Papers

A. The issuance and treatment of BAs and CPs shall be in line with the CBN's "Guidelines on the issuance and treatment of Bankers Acceptances and Commercial Papers" issued on November 18, 2009 or as may be advised by the CBN.

2.7 Basic Information On Borrowers

A DFI shall: A. Ensure that every borrower completes the Loan Application Form (LAF) designed by the DFI and that the LAF is approved by relevant officers or organs of the DFI.

B. Ensure that the LAF contains such information as the MRC may require to evaluate the application.

C. Not disburse any credit facility (including renewal, enhancement and rescheduling/restructuring) until the Loan Application Form (LAF) designed by the DFI is completed by the customer and approved by relevant officers or organs of the DFI.

D. Ensure that the LAF contains such information as the DFI may require to evaluate the application, which may include recent audited financial statements/management accounts, projected cash flows, and records of past bank accounts.

E. Obtain credit reports within 30 days prior to the disbursement of facilities from at least two (2) credit bureaux before granting any facility to a customer. The result of the enquiry shall be documented in the credit file of the customer. In addition, compliance with the CBN Circular OFI/DIR/CIR/GEN/17/151 issued on May 10, 2017 on Data Exchange Agreement with at least two licensed Credit Bureaux is mandatory.

F. Provide evidence that a search has been conducted on the borrower in the CBN's Credit Risk Management System (CRMS) database.

G. Obtain the Bank Verification Number (BVN) of individual borrowers and directors of corporate borrowers.

H. Obtain the Tax Identification Number (TIN) of corporate borrowers.

I. Obtain information on entities related to the borrowers.

J. Maintain credit files whether in electronic, print or other form, on all its borrowers, which shall contain adequate and timely information on the credit-worthiness of the borrowers to enable: i. proper and effective monitoring of credit facilities extended by the DFI; and ii. examiners, as well as the bank's internal and external auditors, to have immediate and complete factual information from which they can form an objective opinion on the credit facilities.

K. Maintain basic information (including those set out in the Annexure 1, where applicable), on the following to enable an objective evaluation of the quality of each facility: i. the borrower; ii. the credit facility; iii. the appraisal of the credit application; iv. the conduct and status of the account; v. an offer letter showing conditions for draw down; and vi. evidence of acceptance of offer by the borrower.

2.8 Minimum Information On Credit Print-Outs

A. All DFIs should provide the following minimum details in their credit printouts: i. Account number of customer; ii. Name of customer; iii. Type of facility; iv. Date facility was granted; v. Interest Rate; vi. Authorized limit of facility; vii. Original expiry date; viii. Restructure Date (if any); ix. Balance on account; x. Date of last lodgment or credit operation by the customer; and xi. Sector/Industry; xii. Type and value of security pledged; xiii. Borrower's BVN or TIN; xiv. Evidence of NCR registration.

2.9 Management Of Market Risk

a) DFIs are required to institute strategies to manage market risk including the development of risk appetite, appropriate policies, processes, and organization structures to support ongoing management and quantification market risk.

b) Quantification of market risk capital charge shall be in line with the CBN Guidance Notes on the Calculation of Capital Requirement for Market Risk.

c) In addition to any hedging instruments held, a DFI shall be required to match its long-term loans to borrowers with liabilities of similar characteristics and duration so as to maintain minimal risk exposure to fluctuations in market interest rates.

d) A DFI shall employ appropriate risk management tools to assess and report to the CBN each quarter its market risk exposure.

2.10 Management Of Operational Risk

a) DFIs are required to institute strategies to manage operational risk including risk appetite, policies, processes, and organization structures to support ongoing management and quantification operational risk.

b) Quantification of market risk capital charge shall be in line with the CBN Guidance Notes on the Calculation of Capital Requirement for operational risk.

2.11 Foreign Currency Borrowing

a) In line with CBN letter OFI/DIR/DOC/GEN/018/271 on foreign borrowing dated February 12, 2018, the aggregate foreign currency borrowing of a DFI shall not exceed 125 per cent of its shareholders' funds unimpaired by losses or such other level as the CBN may specify from time to time.

b) In addition, DFIs shall borrow and lend in the same currency (natural hedging) to avoid currency mismatch associated with foreign currency risk. They shall ensure that the basis of the interest rate for borrowing matches that of lending i.e. floating rate liabilities shall be used to create only floating rate assets and fixed interest rates liabilities used to create only fixed rate assets.

2.12 Liquidity Requirements

A. The liquidity ratio shall be the proportion of liquid assets to borrowings due within one (1) year.

B. A DFI shall maintain at all times sufficient liquid assets to meet its maturing obligations in amounts that comply with a minimum liquidity ratio of 10 per cent or as may be prescribed by the CBN.

C. A DFI shall adopt and implement sound and prudent liquidity management framework, which shall describe in detail its Asset Liability Management (ALM) Policy and be overseen by its Asset/Liability Management or similar Committee.

D. A DFI's liquidity management framework shall include: i. Techniques that effectively identify, measure and manage its liquidity risk.

ii. Periodic analyses of net funding requirements under alternative scenarios.

iii. Contingent liquidity planning.

2.13 Maintenance Of Statutory Reserves

A. Every DFI shall maintain a reserve fund and shall out of its net profit after taxation and before any dividend is declared, transfer to the statutory reserves as follows: i. Where the reserve fund is less than the paid-up share capital, a minimum of 30% of the net profits; or ii. Where the reserve fund is equal to or in excess of the paid-up share capital, a minimum of 15% of net profit; iii. No transfer to the reserve fund shall be made until all identifiable losses have been made good.

iv. A wholesale-DFI shall plough back all its profit after tax to reserve unless it has met the regulatory minimum capital of N100 billion or such other amount as the CBN may prescribe.

2.14 Capital Adequacy Requirements

A. A DFI shall commence operations with, and maintain at all times, a minimum paid-up capital as may be prescribed by the CBN.

B. The Capital Adequacy Ratio (CAR) of a DFI shall be measured as the ratio of qualifying capital to its risk weighted assets.

C. The minimum CAR for each DFI shall be 10 per cent or as may be prescribed by the CBN from time to time.

D. A DFI shall maintain a ratio of not more than 1:10 of its shareholders' funds unimpaired by losses to its net credits.

E. DFIs that do not possess adequate capital shall be classified in line with the Supervisory Intervention Framework and appropriate actions taken in line with the Framework.

F. Capital adequacy shall be computed in accordance with the template for CAR Computation as prescribed by the CBN.

G. In line with the Supervisory Intervention Framework, DFIs that do not possess adequate capital may be classified and supervisory actions taken as indicated in the framework.

2.15 Restrictions On Declaration Of Dividends

A. No dividend shall be paid until after: i. All accumulated losses have been fully absorbed and written off. ii. All preliminary and pre-operational expenses have been written off. iii. Capital Adequacy ratio has been met. iv. All matured obligations have been met.

2.16 Credit Ratings

A. DFIs shall have a board-approved credit rating policy and model for rating counterparties/obligors and sectors. The ratings of obligors shall be updated, at least, on a quarterly basis.

B. In measuring credit risk of loans and advances to customers and/or counterparty level, DFIs must ensure that the following components are considered: i. The probability of default of the obligor; ii. The exposure at default; iii. The loss given default; iv. Forward looking information; and v. The peculiarities of the sector in which the obligor operates.

2.17 Policies And Procedures For Write-Off Of Fully Provided Credit Facilities

A. The facility must have been fully provided for in line with the loan loss provisioning guidelines and must be in DFI's book for at least one year after full provision.

B. There should be evidence of board approval. C. If the facility is insider or related party credit, the approval of CBN is required. D. The fully provisioned facility must be appropriately disclosed in the audited financial statement.

2.18 Keeping Of Proper Records

A. All DFIs shall keep proper records of all transactions as may be required by the CBN. Such documents should be arranged sequentially and be made available to CBN and other regulatory authorities on demand.

B. All DFIs shall refrain from adopting any measures or practices whereby they would either artificially or temporarily show an ostensibly different position of their records and/or financial statements.

2.19 Other Known Losses

A. All assets for which the net realizable value has fallen below the carrying value shall have the difference in value recognized and charged to the income account as "other known losses".

2.20 Implementation Of Examination Report Recommendations

A. The Board and management of all DFIs shall ensure the implementation of all recommendations contained in the CBN Examination Reports.

2.21 Revaluation Of Fixed Assets

A. The prior approval of the CBN shall be obtained by a DFI before the recognition of revaluation surplus on fixed assets in its books. The valuation shall be made by qualified professional(s) whose identity and qualifications are stated, with the valuation basis clearly shown.

B. DFIs are to note that revaluation of fixed assets is applicable to own premises only.

2.22 Permissible Investments And Restrictions

A. The following assets shall be permissible investments by a DFI: i. Debt obligations issued, insured, or guaranteed by the Federal Republic of Nigeria or any agency thereof.

ii. Demand deposits, term deposits, or certificates of deposit in licensed banks.

iii. Deposits and reserves held with the CBN.

iv. Other investments specifically permitted by the CBN.

B. At no time, except in the first two (2) years of DFI's operation, shall permissible investments exceed 40 per cent of DFI's total assets, unless otherwise stipulated by the CBN in considering the DFI's liquidity needs and its borrowers' demands for loanable funds.

C. At no time shall a DFI use financial derivatives except as hedging instruments.

3 Code Of Corporate Governance

A. All DFIs shall comply with the provisions of the Code of Corporate Governance for Development Finance Institutions as issued by the CBN Circular FPR/DIR/CIR/GEN/07/017 dated October 26, 2018 or any other relevant circular(s) issued by the CBN.

4 Know-Your-Customer And Anti-Money Laundering Measures 4.1 Know Your Customer

A. All DFIs shall be required to comply with the principles and procedures of Know Your Customer (KYC) and relevant circulars issued by the CBN.

4.2 Anti-Money Laundering Measures

A. All DFIs shall be required to comply with the Anti-Money Laundering Act 2011, CBN AML/CFT (for Banks and Other Financial Institutions) Regulation 2013 and relevant circulars issued by the CBN.

4.3 Records Retention

A. All DFIs shall keep records on all transactions for a minimum period of six (6) years and shall retain such records for a longer period where the transactions relate to litigation or are required by the Court of Law or by any other competent authority.

4.4 Correspondent Banking

A. DFIs shall gather sufficient information about their correspondent banks to understand fully the nature of their business. Factors to consider include: i. Know your customer policy (KYC) ii. Information about the correspondent bank's management and ownership iii. Major business activities iv. Their location v. Money laundering prevention and detection measures vi. The purpose of the account vii. The identity of any third party that will use the correspondent banking services (i.e. in case of payable through accounts) viii. Condition of the bank regulation and supervision in the correspondent's country

4.5 Suspicious Transactions

A. DFIs should pay special attention to all complex, unusually large transactions, and all unusual patterns of transactions, which have no apparent economic or visible lawful purpose. Examples of such suspicious transactions are listed at Annexure 1. However, these are not intended to be exhaustive and only provide examples of the most basic ways in which money may be laundered. The background and purpose of such transactions should, as far as possible, be examined, the findings established in writing, and be available to help the relevant authorities in inspection and investigation.

B. The existing list of examples of suspicious transactions as Annexure 2 is supplemented with the enclosed list of characteristics of financial transactions that may be a cause for increased scrutiny as Annexure 3.

5 Loan Classification And Loss Provisioning 5.1 Loan Classification System For Other Than Specialized Loans

A. DFIs shall review their credit portfolio continuously (at least once in a quarter) with a view to recognising deterioration in credit quality. Such reviews shall classify the credit exposures based on the risk of default.

B. In order to facilitate comparability of DFIs' classification of their credit portfolios, the assessment of risk of default shall be based on criteria which shall include, but are not limited to repayment performance and borrower's repayment capacity on the basis of current financial condition.

C. For syndicated facilities, the classification shall be the same across all DFIs involved in the syndication. Thus, the worst classification by any of the DFIs involved in the syndication shall apply across board.

D. Credit facilities shall be classified as "performing", "watchlist" or "non-performing" as defined below: i. Performing facility: A credit facility is deemed to be performing if all due principal and interest have been settled or if not past due by more than 30 days.

ii. Watchlist facility: A facility where principal and/or interest is past due by 31 to 90 days; iii. Non-performing facility: A credit facility shall be deemed as nonperforming when any of the following conditions exists: a) interest or principal is past due for more than 90 days; b) interest past due for 91 days or more have been capitalised, rescheduled or rolled over into a new loan; c) off balance sheet obligations crystallise.

E. Non-performing credit facilities shall be classified into three categories namely, sub-standard, doubtful or lost on the basis of the criteria below:

I. Sub-Standard

The following objective and subjective criteria shall be used to identify sub-standard credit facilities: a) Objective Criteria: credit facilities on which principal and/or interest past due remain outstanding for at least 91 days but not more than 180 days.

b) Subjective Criteria: i). Credit facilities which display well-defined weaknesses, which could affect the ability of borrowers to repay such as inadequate cash flow to service debt, undercapitalisation or insufficient working capital, absence of adequate financial information or collateral documentation, irregular payment of principal and/or interest, non-performing facilities with other banks and inactive accounts where withdrawals exceed repayments or where repayments can hardly cover interest charges.

ii). Significant deterioration in credit rating of the borrower/obligor between initial recognition and the reporting date.

iii). Significant financial difficulty of the borrower.

iv).Grant of concessions to the borrower/obligor by its lender(s) for economic or contractual reasons relating to the borrower/obligor's financial difficulty, especially where the lender(s) would not ordinarily consider such concession(s).

v). It is probable that the borrower will enter bankruptcy or other financial reorganization.

vi).The purchase or origination of a financial asset at a deep discount that reflects credit losses.

Ii. Doubtful

The following objective and subjective criteria shall be used to identify doubtful credit facilities: a) Objective Criteria: credit facilities on which unpaid principal and/or interest remain outstanding for at least 181 days but not more than 360 days.

b) Subjective Criteria: credit facilities which, in addition to the weaknesses associated with sub-standard credit facilities reflect that full repayment of the debt is not certain or that realisable collateral values will be insufficient to cover DFI's exposure.

Iii. Lost Credit Facilities

The following objective and subjective criteria shall be used to identify lost credit facilities: a) Objective Criteria: facilities on which unpaid principal and/or interest remain outstanding for more than 360 days and offbalance sheet engagements that have crystalized.

b) Subjective Criteria: facilities which in addition to the weaknesses associated with doubtful credit facilities are considered uncollectible and are of such little value that continuation as a bankable asset is unrealistic such as facilities that have been abandoned, facilities secured with unmarketable and unrealizable securities and facilities extended to judgment debtors with no means or foreclosable collateral to settle debts.

F. A restructured or rolled-over facility shall not be treated as a new facility. G. Where a credit facility already classified as "non-performing" is restructured or rolled-over, that facility shall retain its previous classification as if the restructuring or roll over did not occur.

H. When a facility rescheduling is agreed with a customer, provisioning shall continue until it is clear that the rescheduling is working, at a minimum, for a period of 90 days.

I. For a "non-performing" or "watchlist" facility to be re-classified as "performing", outstanding interest and due but unpaid principal shall not exceed 30 days. Similarly, for a "non-performing" facility to can be reclassified as "watchlist", outstanding interest and due but unpaid principal shall not exceed 90 days.

J. DFIs are required to adopt the criteria specified in 5.1 (A) to (I) to classify their credit portfolios in order to reflect the recoverable values of their credit facilities.

K. DFIs should note that the CBN reserves the right to object to the classification of any credit facility and to prescribe the classification it considers appropriate for such credit facility.

5.2 Classification Of "Specialized Loans"

A. Without prejudice to the developmental (intervention) facilities of the CBN, a specialized loan has the following features: i. The economic purpose of the loan is to acquire or finance an asset, which typically serves as the collateral for the loan.

ii. The tenor of the loan shall not be less than two years.

iii. The cash flow generated by the collateral is the loan's sole or almost exclusive source of repayment.

iv. The terms of the facility give the DFI control over the collateral and the income it generates.

v. The primary determinant of credit risk is the variability of the cash flow generated by the collateral rather than the independent capacity of a broader commercial enterprise.

B. Specialised loans shall be classified as "performing", "watchlist" or "non-performing" as defined below: i. Performing facility: A specialised loan is deemed to be performing if all due principal and interest have been settled or if not past due by more than 90 days ii. Watchlist facility: A specialised loan shall be classified as 'Watchlist' where the overdue repayment obligation is between 5 and 15 per cent of the total outstanding amount due or aggregate instalments thereof are overdue by 91 to 180 days.

iii. Non-performing facility: A credit facility shall be deemed as nonperforming when any of the following conditions exists: a. interest or principal is past due for more than 180 days; b. interest past due for 181 days or more have been capitalised, rescheduled or rolled over into a new loan; c. off balance sheet engagements crystallise.

C. Non-performing credit facilities shall be classified into four categories, namely sub-standard, doubtful, very doubtful or lost based on the criteria below:

I. Sub-Standard

The following objective and subjective criteria shall be used to identify sub-standard credit facilities: a. Objective Criteria: where the overdue repayment obligation is more than 15 per cent but less than 25 per cent of the total outstanding amount or aggregate instalments thereof are overdue by 181 days to two years.

b. Subjective Criteria: a loan regarding which, in addition to relevant subjective criteria indicated under sub-standard subcategory of other than specialised loans, any of the following is observed: i). A project milestone has been missed, ii). There are indications that financial resources needed to complete the project are insufficient, iii). The contractor or borrower has recorded loss of its key management staff, iv). The contractor or borrower has filed for bankruptcy or been declared bankrupt, v). There has been deterioration in the asset's debt coverage ratio.

Ii. Doubtful Loans

The following objective and subjective criteria shall be used to identify doubtful credit facilities: a. Objective Criteria: where the overdue repayment obligation is more than 25 per cent but less than 35 per cent of the total outstanding amount or aggregate instalments thereof are overdue by more than two years but not more than three years.

b. Subjective Criteria: Loans that in addition to subjective criteria for classifying specialised loans as sub-standard, show the following weaknesses, i). Available evidence suggests that the project will not be delivered on time, ii). There are indications that the contractor lacks adequate capacity to complete the project, iii). A key project sponsor has failed to honour its financial commitment, iv). Insolvency of any of the project participants where this will have a material adverse effect on the project, or v). For agricultural loans, where a major disease epidemic has affected the crop or animal production funded by the loan.

Iii. Very Doubtful Loans

The following objective and subjective criteria shall be used to identify very doubtful specialised loans: a. Objective Criteria: where the overdue repayment obligation is more than 35 per cent but less than 45 per cent of the total outstanding amount or aggregate instalments thereof are overdue by more than three years but not more than four years.

b. Subjective Criteria: Loans that in addition to subjective criteria for classifying specialised loans as doubtful, reveal the following weaknesses, i). There has been a cost overrun, ii). The appraised value of the collateral become lower than the carrying value of the loan, iii). There is evidence that the project may not be profitable, iv). Failure of the project to pass completion test, or v). Due to any reason whatsoever, the projected cash flows cannot be realised

Iv. Lost Loans

The following objective and subjective criteria shall be used to identify lost specialised loans: a. Objective Criteria: where the overdue repayment obligation is more than 45 per cent of the total outstanding amount or aggregate instalments thereof are overdue by more than 4 years.

b. Subjective Criteria: Loans that in addition to subjective criteria for classifying specialised loans as very doubtful, indicate the following weaknesses: i). The project has been abandoned, or ii). For agricultural products, the crop funded by the loan has failed.

D. DFIs may consider granting obligors a moratorium on principal repayment and/or interest based on the cash flow characteristics of the asset.

E. Requirements stated in A-C and F-I of 5.1 (classification system for other than specialized loans) shall also apply to specialized loans.

F. DFIs are required to adopt the criteria specified in 'A' - 'E' above to classify their specialized loans.

G. The Central Bank of Nigeria reserves the right to object to the classification of any specialized loan and to prescribe the classification it considers appropriate for such credit facility.

5.3 Non-Performing Loans

A. The non-performing loans ratio of DFIs shall not exceed 10 per cent or such percentage as may be prescribed by the CBN.

5.4 Loan Loss Provisioning For Other Than Specialised Loans

A. DFIs are required to make adequate provisions for losses based on the credit portfolio classification system prescribed in 5.1. Two types of provisions (that is specific and general) are considered adequate to achieve this objective.

B. Specific provisions are made on the basis of risk of default on credit facilities while general provisions are made in recognition of the fact that a performing credit facility may be inherently risky.

C. Consequently, DFIs shall make provisions for credits as specified below: i. General Provision - 2 per cent of the outstanding balance of performing facilities or as may be advised by the CBN from time to time.

ii. Specific provisions shall be applied as follows: a. For facilities classified as non-performing, interest overdue by more than 90 days shall be fully (100 per cent) provided for and recognized on cash basis only.

b. For facilities classified as non-performing, principal repayments that are past due shall be fully (100 per cent) provided for and recognized on cash basis only.

c. For outstanding principal of facilities classified as "watchlist", 5 per cent provision on the outstanding principal amount.

d. For principal repayments that are not yet due on non-performing credit facilities, provisions shall be made on the outstanding principal balance as follows: i). Sub-Standard: 20 per cent; ii). Doubtful: 50 per cent; and iii). Lost: 100 per cent.

5.5 Loan Loss Provisioning For Specialized Loans

A. DFIs are required to make adequate provisions for losses on their specialized loans portfolio using the classification system prescribed in Paragraph 28 in order to reflect their true financial condition.

B. Specific and general provisions are considered adequate to achieve this objective.

C. Specific provisions are made on the basis of risk of default on specialized loans while general provisions are made in recognition of the fact that a performing loan may be inherently risky.

D. Consequently, all DFIs shall make provisions for credits as specified below: i. General provision at 2 per cent of the outstanding balance of performing specialized loans or as the CBN may advise from time to time.

ii. Specific provisions shall be applied as follows: a. For facilities classified as non-performing, interest overdue by more than 90 days shall be fully provided for and recognized on cash basis only.

b. For facilities classified as non-performing, principal repayments that are past due by more than 180 days shall be fully provided for and recognized on cash basis only.

c. For outstanding principal of facilities classified as "watchlist", 5 per cent provision on the outstanding principal amount.

d. For principal repayments that are not yet due on non-performing specialized loans, provisions shall be made on the outstanding principal balance as follows: i). Sub-Standard, 20 per cent; ii). Doubtful, 50 per cent; iii). Very doubtful, 75 per cent iv).Lost, 100 per cent.

E. The classifications and provisioning for specialized loans shall take into considerations the cash flows and gestation periods of the different loan types.

5.6 Collateral Adjustment For Lost Facilities

A. To encourage utilisation of more credit enhancement and mitigation strategies, collateral adjustments shall be applied in loan provisioning.

i. For collateral to be considered for "Haircut Adjustments", it must be: a. Perfected; b. Realisable, with no restrictions on sale; and c. Regularly valued with transparent method of valuation; ii. All documentation used in collateralized transactions must be binding on all parties and legally enforceable in all jurisdictions. DFIs must conduct sufficient legal review to verify this and have a well-founded legal basis to reach this conclusion, and undertake such further review as necessary to ensure continuing enforceability.

iii. Valuations of residential and commercial properties shall be carried out by an independent professional valuer. The valuer, while assigning any values to the mortgaged residential and commercial property, shall take into account all relevant factors affecting the saleability of such assets including any difficulty in obtaining their possession, their location, condition and the prevailing economic conditions in the relevant sector, business or industry.

iv. The values of mortgaged residential and commercial properties so determined by the valuer must be a reasonably good estimate of the amount that could currently be obtained by selling such assets in a forced/distressed sale condition. Valuers shall also mention in their report the assumptions made, the calculations/formulae/bases used and the method adopted in the determination of the values i.e. the forced sale value (FSV).

v. The following are collateral instruments eligible for collateral adjustment: a. Cash b. Treasury bills and other government securities. c. Quoted equities and other traded securities. d. Bank guarantees and receivables of blue chip companies. e. Residential legal mortgage. f. Commercial legal mortgage g. Other collaterals as defined by the CBN from time to time.

vi. The following hair cut adjustments shall be applicable on all loan types classified as lost:

Description of Collateral	Haircut adjustments weightings
Cash	0%
Treasury Bills and government securities e.g. bonds 0% Quoted equities and other traded securities 20% Bank guarantees and Receivables of blue chip 20% companies Residential legal mortgage 50% Commercial legal mortgage 50%

vii. The haircuts adjustment weightings shall be taken into consideration in arriving at the adjusted provisions for facilities classified as lost. The adjusted provisions shall be derived as follows: Required Provision = E - {VC X (1- HW)} Where, E = Total Exposure HW = haircut weightings VC = Value of Collateral If {VC X (1-HW)} is greater than E then no provision is required.

The value of collateral for quoted equities and other traded securities shall be market value while for mortgages, it shall be forced sale value (FSV).

viii. The CBN will review the list of eligible collaterals and the haircut adjustments applicable from time to time.

B. Other Conditions For Haircut Adjustments

i. The non-performing facilities requiring haircut adjustments and the haircut adjustment calculations including valuation of collaterals shall be reviewed by the DFI's auditors and must be ratified by the CBN.

ii. For the purpose of (i) above, review of valuation by external auditors does not fall under appraisal or valuation services prohibited by the Code of Corporate Governance iii. A maximum of 1 year is allowed for the haircut adjustments pending which the collaterals shall be realized and shortfall in provision taken.

iv. If the facility on which haircut adjustment has been applied remains non-performing after one year, then the haircut adjustment will be disregarded.

5.7 Treatment Of Ifrs Impairment Charge For Prudential Purposes

DFIs shall compute impairment charge on financial instruments and offbalance sheet engagements as prescribed in the relevant IFRS.

A. The IFRS impairment charge shall be compared with provisions determined under this Guidelines and the difference shall be treated as follows: i. If prudential provisions are greater than IFRS impairment charge, the difference shall be transferred from the general reserve to a non-distributable regulatory risk reserve.

ii. If prudential provisions are less than IFRS impairment charge, the difference shall be transferred from the regulatory risk reserve account to the general reserve to the extent of the nondistributable regulatory risk reserve previously recognized.

B. The non-distributable regulatory risk reserve shall not be recognised as a component of qualifying capital.

5.8 Credit Portfolio Disclosure Requirement

A. A DFI shall provide in its audited financial statements, an analysis of its credit portfolio into "performing", "watchlist", and "nonperforming" as defined in these Guidelines.

B. The amount of provision for deterioration in credit quality (that is, losses) shall be segregated between principal and interest.

C. A maturity profile of credit facilities based on contracted repayment programme, shall be provided along with the maturity profile of funding liabilities in the financial statement.

D. A DFI is also to provide a vintage analysis of its credit portfolio as follows:

	<= 1	> 1 year <=3	> 3	Total
	year	years	years
		N	N	N	N
Performing Watchlist Nonperforming Total

5.9 Interest Accrual

A. It is the responsibility of a DFI's management to recognize interest revenues when they are earned or realized and make provision for all losses as soon as they can be reasonably estimated.

B. However, interest on non-performing credit facilities overdue by more than 90 days shall be fully (100 per cent) provided for and recognized on cash basis only.

5.10 Classification And Provisioning For Other Assets

A. The term "other assets" relates to those asset items that are not shown separately in the balance sheet of a DFI. These items include impersonal accounts (of various descriptions), suspense accounts such as frauds and cashiers' shortages, cheques purchased, uncleared effects and interbranch items. The accounts could contain long outstanding items, the origins of which had been forgotten, untraceable or irreconcilable. In situations like these, the items if not material shall be written off and where material (i.e. at least 10 per cent of aggregate balance of other assets) shall be classified as shown below. It shall be noted that items enumerated below are by no means exhaustive:

I. Sub-Standard

a. Fraud cases of up to 1 month but less than 3 months old and under police investigation regardless of the likely outcome of the cases.

b. A minimum provision of 20 per cent shall be made for "other assets" classified as sub-standard.

ii. Doubtful a. Items for doubtful classification shall include, but are not limited to outstanding fraud cases of 3 to 6 months old, with slim chances of full recovery.

b. A minimum of 50 per cent provision shall be made for "other assets" classified as doubtful.

Iii. Lost

a. Items for lost classification shall include, but are not limited to the following: i). Cheques purchased and uncleared effects over 30 days old and for which values had been given.

ii). Outstanding fraud cases over 6 months old and involving protracted litigation.

iii). Inter-branch items over 30 days old whether or not the origins are known.

iv).All other intangible suspense accounts over 30 days old.

b. Full provision (i.e. 100 per cent) shall be accorded to items classified lost.

5.11 Facilities Without Approval:

A. DFIs shall not allow credit facilities without due approval. For facilities that were inadvertently extended without approval, the account shall be regularized within 30 days or be fully provided for.

5.12 Off- Balance Sheet Engagements

A. A proper appraisal of off-balance sheet engagements shall be undertaken with a view to determining the extent of loss a DFI may likely sustain. Off-balance-sheet engagements include letters of credit, bonds, guarantees, indemnities, acceptances, and pending or protracted litigations (the outcome of which may not be easily determined).

B. The following factors shall be taken into consideration in recognizing losses on off-balance-sheet engagements: i. Date the liability was incurred ii. Expiry Date iii. Security pledged iv. Performance of other facilities being enjoyed by the customer, e.g.

loans and advances

V. Perceived Risk.

C. Non-performing off balance sheet engagements shall be recognized on the balance sheet, classified lost and provisions made in line with Paragraph 27.D.iii and 28.B.iii D. Off-balance sheet engagements shall not form part of balance sheet totals while their disclosure in note form shall distinguish between: i. Direct credit substitutes, e.g. general guarantees of indebtedness (including standby letters of credit serving as financial guarantees for loans and securities), and acceptances (including endorsements with the character of acceptances); ii. Certain transaction-related contingent items (e.g. performance bonds, bid bonds, warranties and standby letters of credit related to particular transactions); iii. Short-term self-liquidation trade related contingencies (such as documentary credits collateralized by the underlying shipments); iv. Sale and repurchase agreements and assets sales with recourse, where the credit risk remains with the DFI; v. Forward assets purchases, forward deposits and partly-paid shares and securities, which represent commitments with certain draw down; vi. Note issuance facilities and revolving underwriting facilities; vii. Other commitments (e.g. formal standby facilities and credit lines) with an original maturity of over one year; and viii. Similar commitments with an original maturity of up to one year, or which can be unconditionally cancelled at any time.

ix. Commitments that are unconditionally cancellable, or that effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness, x. Lending of DFIs' securities or the posting of securities as collateral, including instances where these arise out of repo-style transactions (i.e. repurchase/reverse repurchase and securities lending/securities borrowing transactions) E. DFIs shall make a general provision of 1 per cent of the credit equivalent value (CEV) of off-balance sheet engagements.

F. To compute the CEV, DFIs shall apply a credit conversion factor of 50 per cent to all categories of off-balance sheet engagements.

5.13 Financial Soundness Indicators And Financial Ratios

A. A DFI shall, as part of its risk management framework, institute a process for computing financial ratios and financial soundness indicators for assessing its financial health.

B. Benchmarks should be set and actual results computed and compared to the benchmarks at least on a quarterly basis. The report should be presented to the Board of Directors or appropriate Board Committees for deliberation and remedial actions as considered necessary; C. Illustrative examples of financial soundness indicators and financial ratios are presented in Annexures 2 and 3.

5.14 Update Of The Prudential Guidelines

A. The CBN shall review these Guidelines as and when necessary but not later than five years from the effective date set out below.

5.15 Effective Date

A. These Guidelines shall take effect from January 1, 2020.

Information To Be Maintained In Credit Files

(A) Information On Borrower:

i. Natural Persons - Occupation, Employer, Salary/Income, Financial position/net worth and any other relevant information.

ii. Others - Constitution (proprietorship, partnership, private company, public company, society, club, co-operative, statutory board), business background and history, organization structure, management team/directors, shareholders/proprietor/partners, financial position and performance, and any other relevant information as may be prescribed by the CBN.

(B) Information On Credit Facility:

i. Description of facility type ii. Purpose of facility iii. Terms of facility - limits, interest rates, repayment schedules, expiry dates iv. Collateral - types, valuation amount, valuation date and where v. applicable, name of the valuer vi. Guarantors - names, financial position and net worth

(C) Information For Appraisal Of Credit Application:

(Certain information would not be applicable for borrowers who are natural persons.) (1) Assessment and recommendations of account officer/manager (2) Approval and basis of approval by management/credit committee (3) Qualitative analyses based on: i. borrower Information ii. history of relationship with customer iii. information on the banking relationship of other related groups of the borrower with the bank iv. information obtained on the borrower from other institutions and sources, including related offices of the bank v. analysis of industry and business risk vi. single customer concentration (if appropriate) (4) Quantitative analyses based on: i. Financial position and performance (previous, current and projected) ii. Business plans, sources and cash flow forecast for meeting repayment requirements (5) Capital resources (6) Other commitments (7) Collateral appraisal and value

(D) Information For Periodic Credit Review

(Certain information would not be applicable for borrowers who are natural persons.) (1) Assessment and recommendations of credit review officer, including: i. Credit grading/rating accorded ii. Provision for losses iii. Suspension of interest (2) Approval and basis of approval for renewals; revision in terms and conditions; and changes in credit grading (3) Latest available information on: i. Outstanding facilities utilized, including contingent liabilities, commitments and other off-balance sheet transactions ii. Conduct and servicing of account iii. Correspondences and call reports from meetings with borrowers and site visits iv. Current qualitative analyses based on latest updated information on borrower, including review comments from internal and external auditors where available (4) Current quantitative analyses based on latest updated financial information, appraisals and valuations (5) Information on the account conduct of other related groups of the borrower (6) Analysis of industry and business risk

5.16 Annexure 2 Financial Soundness Indicators

Indicator	Indicates	Comments and basis of computation
Capital	Broad measure of capital including items
adequacy	giving less protection against losses, such as subordinated debt, tax credits, unrealized capital gains
Regulatory capital to risk- weighted assets	Total qualifying capital	x	100
	Risk weighted assets
Capital	Highest quality capital such as shareholder
adequacy	equity/ retained earnings, relative to risk weighted assets
Regulatory Tier 1 capital to risk weighted assets	Total tier 1 capital x	100
	Risk weighted assets
Capital	Tier 2 capital relative to risk weighted
adequacy	assets
Regulatory Tier 2 capital to risk weighted assets	Total tier 2 capital x	100
	Risk weighted assets
Non-performing loans net of provision to capital	Capital	Indicates	potential	size	of	additional
	provisions that may be needed relative to
adequacy	capital

Indicator	Indicates	Comments and basis of computation NPL - Provision X 100 Total qualifying capital
Capital	Broad measure of capital adequacy which
adequacy	is a buffer for losses
Capital to assets	Total qualifying capital	X	100
	Total assets
Asset	Indicates the credit quality of banks' loans
quality
Non-performing loans to total gross loans	Non-performing loans	X 100
		Gross loans
Asset	Identifies	exposures	concentrations	to
quality	particular sectors
Sectoral distribution of loans to total loans		Loans per Sector	X 100
	Gross loans
Asset	Identifies credit exposure to large borrowers
quality	Aggregate large exposure	X 100
Large exposures to capital	Total qualifying capital
	A large exposure is any credit to a customer or a group of related borrowers that is at least 10% of a bank's shareholders fund unimpaired by losses
Asset	Identifies credit exposure concentrations to
quality	particular countries by the banking system
Geographical distribution of loans to total loans	Loans per defined geographical area X 100 Gross loans

Indicator	Indicates	Comments and basis of computation
Earnings/	Assesses scope for earnings to offset losses
profitability	relative	to	capital	or	loan	and	asset
	portfolio
Return on assets	PAT	x 100
	Total assets
Earnings/	Indicates	importance	of	net	interest
profitability	income and scope to absorb losses
Interest margin to gross income	Net interest income Gross Income
Earnings/	Indicates	extent	to	which	non-interest
profitability	expenses weaken earnings
Non-interest expenses to gross income	Non-interest expense Gross Income
Liquidity	Assesses the overall liquidity status of the bank
Liquid assets to total assets	Specified liquid assets x 100 Total assets
Liquidity	Assesses the vulnerability of the bank to loss of access to market sources of funding or a run on deposits
Liquid assets to short term liabilities	Specified liquid assets	x 100
	Deposits due within one year
Liquidity	Market indicator of counterparty risks in the inter-bank market
Spread between highest and lowest inter-bank rate	Highest interbank rate - Lowest interbank rate

Indicator	Indicates	Comments and basis of computation
Liquidity	Assesses the vulnerability to loss of access to customer deposits
Customer deposits to total (non-interbank) loans	Customer deposits	x 100
	Loans and advances to customers
Exposure	Measures foreign currency mismatch
to FX risk
Net open position in foreign exchange to capital	Net Open Position Total Capital
Exposure	Measures risk to loan portfolios from
to FX risk	exchange rate movements
Foreign currencydenominated loans to total loans	Naira value of FCY loans	x 100
	Loans and advances to customers and banks
Exposure	Measures extent of dollarization
to FX risk
Foreign currencydenominated liabilities to total liabilities	Naira value of FCY liabilities	x 100
	Total liabilities
Earnings/	Indicates extent to which earnings are
profitability	available to cover losses
Return on equity	PAT	x 100
	Shareholders' fund
Earnings/	Indicates dependence on trading income
profitability
Trading income to total income	Net trading income	x 100
	Gross earnings

Indicator	Indicates	Comments and basis of computation
	Earnings/	Indicates the extent to which high noninterest expenses reduces earnings
	profitability	Staff costs	x 100
Staff costs to noninterest expenses		Other operating expenses
	Earnings/	Indicates dependence of earnings on the
	profitability	interest rate spread.
Spread between reference lending and deposit rates		(Reference lending rate - deposit rate) %
Total debt to equity	Leverage	Provides indication of credit risk Debt securities issued x 100 Shareholders fund
	Debt service capacity	Indicates extent to which earnings cover losses are reduced by interest and principal payments
Earnings to interest and principal expenses		PAT	x 100
		Interest & principal payments on debt securities

5.17 Annexure 3

FINANCIAL RATIO	MEASURES	BASIS OF COMPUTATION

Financial Ratios

FINANCIAL RATIO	MEASURES	BASIS OF COMPUTATION
Average cost of deposits Earnings/	Interest expense
	profitability	Average deposit (i.e opening + closing balances)/2
Basic earnings per share	Earnings/	Profit attributable to ordinary
	profitability	shareholders
	(after deduction of debenture int. and tax) Weighted average no of shares in issue
Cost to income ratio	Earnings/	Total cost (interest expense, operating
(1)	profitability	cost before loan loss expense)/Gross earnings
Cost to income ratio	Earnings/	Total overhead cost (operating cost
(2)	profitability	including loan loss expense)/Total net revenue
Cost of interest	Earnings/		Interest expense
bearing liabilities	profitability	Average interest-bearing liabilities (opening + closing balances)/2
Cost of risk	Earnings/	loan loss expense
	profitability	Average loans (i.e opening + closing balances)/2
Marginal cost of	Earnings/	Increase in int. expense during the
funds	profitability	month Increase in average deposits during the same month (annualized)
Yield on interest	Earnings/	Interest income
earning assets	profitability	Weighted average interest earning assets Net Interest Income
Net Interest margin	Earnings/
(1)	profitability

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FINANCIAL RATIO	MEASURES	BASIS OF COMPUTATION
	Weighted average interest-earning assets
Net Interest margin	Earnings/pr	Net interest income
(2)	ofitability	Total interest income
Net revenue from	Earnings/	Interest income - (interest expense +
funds	profitability	loan expense)
Operating profit	Earnings/	Profit before taxation (PBT)
profitability
Operating profit	Earnings/	Operating profit
margin	profitability	Gross earnings
Liquidity ratio	Liquidity	Liquid assets
	Deposit liabilities (as prescribed by the CBN)
Loan to deposit ratio	Liquidity	Total loans
	Total deposit
Provisioning level	Asset	Total provision
quality	Total NPL
Risk asset ratio	Asset	Total loans
quality	Total assets
Leverage ratio	Capital		Total debt capital	x100
adequacy	Total shareholders' fund

Glossary

BA	Banker's Acceptance
BVN	Bank Verification Number
CBN	Central Bank of Nigeria
CEO	Chief Executive Officer
CP	Commercial Papers
CRMS	Credit Risk Management System
FATF	Financial Action Task Force
FCA	Financial Completion Agreement
FSV	Forced Sale Value
IFRS	International Financial Reporting Standards
IRV	Integrated Voice Recording
KYC	Know Your Customer
LAF	Loan Application Form
LNG	Liquefied Natural Gas
LPG	Liquefied Petroleum Gas
NDIC	Nigeria Deposit Insurance Corporation
NPL	Non-Performing Loans
OFISD	Other Financial Institutions Supervision Department
PFA	Project Funds Agreement
PIN	Personal Identification Number
SEC	Securities and Exchange Commission
SME	Small and Medium Enterprise
TIN	Tax Identification Number

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