CBN Halts Dividends, Bonuses In Forbearance-Benefitting Banks

The Central Bank of Nigeria (CBN) has directed all banks currently under regulatory forbearance to suspend the payment of dividends to shareholders, and bonuses to directors and senior management.
The apex bank also barred the affected financial institutions from making new investments in foreign subsidiaries or offshore operations.

In a circular signed by the director of Banking Supervision, Olubukola Akinwunmi, the CBN said the directive aims to bolster capital buffers and promote prudent capital retention across the banking sector.
Regulatory forbearance is a temporary relaxation of specific regulatory requirements during periods of economic difficulty, often to support financial institutions facing challenges.

According to the circular, the latest measure applies to banks benefiting from leniency on credit exposures and single obligor limits (SOL) under a transitional arrangement aimed at stabilising the banking industry in the aftermath of macroeconomic shocks and ongoing sectoral restructuring.

“This temporary suspension is until such a time as the regulatory forbearance is fully exited and the banks’ capital adequacy and provisioning levels are independently verified to be fully compliant with prevailing standards,” the circular stated.

The CBN noted that the move is a supervisory measure designed to ensure banks retain sufficient internal resources to meet current and future obligations, while facilitating the restoration of sound prudential positions.

The apex bank assured that it will closely monitor compliance and collaborate with affected institutions to achieve full regulatory alignment.

LEADERSHIP recalls that the central bank had previously implemented similar measures to safeguard the banking system. In 2020, amidst the COVID-19 pandemic, the CBN directed deposit money banks to restructure loans to households and businesses. This was followed by the extension of interest rate forbearance in March 2021 and April 2022.

Affected commercial banks are expected to comply fully with the latest directive and prioritise capital conservation during the period of regulatory forbearance.