CBN orders Access, GTB, UBA, other banks to stop paying dividends with Forex gain
- The CBN has directed banks to keep profit made from forex to hedge against future loss
- The regulator said banks that unintentionally break the single obligor limit rule would be allowed forbearance
- Forbearance is the only measure put in place as of the policy's implementation date
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The Central Bank of Nigeria (CBN) has instructed Access, GTB, UBA, and other local banks to use gains in their foreign currency (FCY) holdings and liabilities resulting from the recent foreign exchange policy as insurance against potential declines in the Forex rate.
The apex bank disclosed this in a circular sent to banks on Monday, September 11, 2023.
The circular, signed by Haruna Mustafa, Director, Banking Supervision Department of the CBN, was titled, “The Impact of Recent FX Policy Reforms: Prudential Guidance to the Banking Sector”.
Source: UGC
Legit had earlier reported that three Nigerian banks Fidelity, FCMB and GTB with sizable net foreign asset are benefiting from the decline in naira as a result of forex reform policy by the CBN.
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Banks to stop paying dividends with forex gains
The statement highlighted that banks must act with utmost caution and set aside the profits from the FCY revaluation as a counter-cyclical buffer to absorb any future negative changes in the FX rate.
It noted:
“In this regard, banks shall not utilize such FX revaluation gains to pay dividends or meet operating expenses.”
Consequences for breaching SOL policies
The apex bank added that upon application to the CB, banks that unintentionally exceed the Single Obligor Limit (SOL) because of the FX policy would be allowed forbearance.
It, however, stated that the forbearance would only apply to facilities that were in place as of the policy's implementation date.
It further said that such banks would not be subjected to regulatory deductions on amounts in excess of the SOL limit when calculating their CAR.
On Net Open Position (NOP) limit, the regulator stated that banks that violate the NOP prudential restrictions because of a foreign exchange rate revaluation would be given forbearance upon request to the CBN.
The CBN also said the prudential restrictions now in place regarding capital adequacy, dividend payments, and FCY borrowing limitations would still be in effect.
SEC worried as Nigerians abandon N190bn dividends with companies
Legit had reported that the Securities and Exchange Commission, revealed unclaimed dividends in the capital market have skyrocketed to an estimated N190 billion.
SEC Director-General, Lamido Yuguda, disclosed this at the second-post capital committee media briefing on Friday, August 24, 2023.
The SEC DG mentioned identity management issues in Nigeria as a critical factor contributing to the spike in unclaimed dividends.
Source: Legit.ng
