Tuesday, August 9

Economic crisis: CBN permits banks to write off bad loans

Economic crisis: CBN permits banks to write off bad loans

The Central Bank of Nigeria (CBN) says all banks in the country can write off non-performing loans in 2016 due to prevailing economic challenges.

Banks had initially written to the CBN to allow them remove non-performing loans from their balance sheet, contravening the provisions of Section 3.21 (a) of the prudential guidelines.

In its response, which was uploaded on its site on Tuesday but dated July 28, 2016, Tokunbo Martins, director of CBN banking supervision department, said the banks are permitted to do so in 2016.

“The CBN acknowledges the request by banks to amend the requirements of S.3.21 (a) of the prudential Guidelines, which mandates banks to retain in their records, fully provided Non-performing Loans (NPLs) for a period of one year before write-off,” the circular read.

“The CBN has no intention to repeal the provision of the above mentioned section of the guidelines. In view of the current macro-economic challenges however, the CBN hereby grant a one-off forbearance, this year 2016, to banks, to write-off fully provided NPLs without waiting for the mandatory one year.”

This is coming at a time when major banks in the country have been filing for late disclosure of financial statements.

When NPLs are written off, banks tend to present better financial statements, and have less taxes to pay, as NPLs increase tax liability.

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