CBN sets two-day limit for bank resolution contract suspensions - Businessday NG

The Central Bank of Nigeria (CBN) has introduced a maximum two-business-day limit on the suspension of certain payment obligations and contract termination rights involving failing banks and other financial institutions in a move aimed at reducing uncertainty in financial contracts and strengthening commercial risk management. The CBN said the interpretative guidance takes immediate effect.

The new guidance, contained in a circular issued to all banks and other financial institutions on July 1, provides interpretative guidance on the practical operation of Sections 34(2)(b) and 40(2) of the Banks and Other Financial Institutions Act (BOFIA), 2020.

According to the apex bank, the circular, signed by Okey Umeano, acting director, Financial Markets Department, became necessary because the absence of a defined maximum duration for exercising its powers under the relevant sections of BOFIA had created uncertainty for counterparties dealing with Nigerian banks and other financial institutions.

“The Central Bank of Nigeria (CBN) has observed that the absence of a defined maximum duration period pursuant to the exercise of its powers under Sections 34(2)(b) and 40(2) of the Banks and Other Financial Institutions Act, 2020 (BOFIA) has created some uncertainty for counterparties dealing with Nigerian banks and other financial institutions in respect of financial contracts,” the CBN said.