CBN sets two-day limit on contract suspensions for troubled banks
By Aboki Forex —
The Central Bank of Nigeria has issued new guidance on how long it can suspend contracts involving failing banks. The maximum period is now two business days.
The clarification came in a circular signed by Okey Umeano, Acting Director of the Financial Markets Department. It takes immediate effect.
The CBN said the lack of a defined time limit for suspensions under Sections 34(2)(b) and 40(2) of the Banks and Other Financial Institutions Act, 2020 had created uncertainty. Banks, financial institutions and their counterparties did not know how long a suspension could last.
That uncertainty made it harder to manage commercial risk, the CBN said.
The new guidance applies to what the CBN calls Affected Contracts. These are contracts involving a bank or other financial institution that fall under the two BOFIA provisions.
Under Section 34(2)(b), the CBN can suspend payment or delivery obligations when facilitating the acquisition of a failing bank. Under Section 40(2), the CBN Governor can suspend termination rights after a banking licence is revoked.
Both types of suspension now cannot exceed two business days from the date the written order or notice is issued by the CBN Governor.