Deposit cash banks (DMBs) have been directed by the Central Bank of Nigeria to stop utilising gains from the revaluation of the Naira to pay dividends or finance operations. In a letter titled: Impact of Recent FX Policy Reforms: Prudential Guidance to the Banking Sector, which was dated September 11, 2023, and signed by Haruna Mustafa, CBNs director of the banking supervision division, the apex financial institution famous that DMBs are ready to revenue from the evaluate of the overseas trade (FX) regime due to its potential to considerably improve the Naira worth of banks overseas foreign money (FCY) property and liabilities. CBN additionally issued pointers on how banks can handle the influence of FX reform. The letter learn; Additional implications of the FX coverage reforms could embody breaches of single obligor and internet open place limits, attainable improve in asset high quality dangers, and stress on trade capital adequacy.Treatment of FX Revaluation Gains: Banks are required to train utmost prudence and put aside the FCY revaluation gains as a counter-cyclical buffer to cushion any future opposed actions within the FX charge. In this regard, banks shall not make the most of such FX revaluation gains to pay dividends or meet working bills.Single Obligor Limit (SOL): Banks that inadvertently breach the Single Obligor Limit (SOL) due to the FX coverage will likely be granted forbearance upon utility to the CB. The forbearance shall apply solely to present services as on the efficient date of this coverage. Such banks shall be exempted from the regulatory deductions on the surplus above the SOL restrict of their CAR computation.Net Open Position (NOP) Limit: Banks that exceed the NOP prudential limits due to the FX revaluation shall be granted forbearance for the breach upon utility to the CBN.Existing prudential laws on capital adequacy, dividend funds and FCY borrowing limits shall proceed to apply.The publish CBN initiates move to stop banks from utilising Naira devaluation gains appeared first on Linda Ikeji Blog.
