Regulatory Alerts2019-08-23 | FPR/DIR/GEN/PAR/02/010Exposure Draft on the Prudential Guidelines for Microfinance Banks
The Central Bank of Nigeria (CBN) released revised Prudential Guidelines for deposit money banks in Nigeria in June 2010 to enhance the quality of banks' assets. This draft of Prudential Guidelines for Microfinance Banks is now available for comment and observation. It covers risk management, credit policy, lending limits, liquidity ratio, and other financial requirements. The CBN may require additional capital for specific concentration of risks or market risks. All MFBs must comply with the Code of Corporate Governance for Microfinance Banks and relevant CBN circulars. They must also implement recommendations from CBN/NDIC Examination Reports and manage market risk through strategies, policies, and organization structures. To combat money laundering, MFBs should comply with the Money Laundering (Prohibition) 2011 and CBN AML/CFT Regulation 2013. MFBs must keep records for at least six years and classify their credit portfolios to reflect recoverable values. They are also required to make adequate provisions for perceived losses and compute impairment charges on financial instruments. Finally, MFBs should institute a process for computing financial ratios and indicators to assess their financial health.