Regulatory Alerts2015-11-17 | BSD/DIR/GEN/LAB/08/052The Need for Banks to Build Adequate Loan Loss Reserve
The letter, addressed to all banks, highlights the need to increase provisions for loan losses due to the challenging macroeconomic environment. Banks are instructed to raise the general provision on performing loans to 2% during their prudential review, aiming to build sufficient buffers. This directive is issued under the authority of the Prudential Guidelines for Deposit Money Banks 2010.
09-462-36401 BSD/DIR/GEN/LAB/08/052 November 11, 2015 LETTER TO ALL BANKS THE NEED FOR BANKS TO BUILD ADEQUATE LOAN LOSS RESERVE In recent times, the adverse macro-economic environment has been a source of concern in the financial sector. It is however comforting to know that the fiscal and monetary authorities are deploying remedial policy measures to ameliorate these challenges. Accordingly, in line with the provision of section 12.14 of the Prudential Guidelines for Deposit Money Banks 2010 (Regulators Power over Adequacy of Provisioning), banks are required to immediately increase the general provision on performing loans to 2% in the prudential review of their credit portfolios. This is an attempt to ensure that adequate buffers against unexpected loan losses are built up. This directive is without prejudice to the relevant provisions of the International Financial Reporting Standards. Yours faithfully, TOKUNBO MARTINS (MRS.) DIRECTOR OF BANKING SUPERVISION