CBN ends forbearance measures, asks banks to provide capital restoration plan

CBN ends forbearance measures, asks banks to provide capital restoration plan

The Central Bank of Nigeria (CBN) has issued a coordinated
set of transitional measures to guide banks out of the regulatory forbearance
regime introduced during the COVID-19 crisis.

 

In a circular dated June 20 and signed by Olubukola
Akinwunmi, director of banking supervision, the bank said the measures are
designed to support affected banks in complying with prudential requirements,
while facilitating a smooth and credible exit from temporary regulatory
concessions.

 

CBN ENDS FORBEARANCE MEASURES

Effective June 30, 2025, the CBN said all COVID-19-related
forbearance measures — including waivers on single obligor limits (SOL) — will
be terminated.

 

According to the bank, the initiative aims to restore risk
sensitivity in credit classification, provisioning, and asset quality
assessments.

 

“Affected banks must align all impacted credit exposures
with existing CBN Prudential Guidelines and other relevant regulations,” the
circular reads.

 

“To support asset quality clean-up, the requirement to
retain fully provisioned loans for one year before write-off (Section 3.21,
Prudential Guidelines 2020) is temporarily waived for forbearance related
facilities (Please refer to our email of February 6, 2025 with the Subject;
Regulatory Waiver on Write-Off of Forbearance Loans).”

 

The CBN said lenders can proceed with loan write-offs to
lower their non-performing loan (NPL) ratios, as long as they meet internal
governance standards for doing so.

 

AT1 CAPITAL CAP LIFTED TEMPORARILY

To strengthen capital buffers during the transition, the CBN
also temporarily lifted regulatory caps on the recognition of additional tier 1
(AT1) capital in the capital adequacy ratio (CAR) computation.

 

The apex bank said the relief takes effect from June 30,
2025, and will remain in place until March 31, 2026.

 

“This adjustment is intended to enhance banks’ capital
buffers without compromising long-term capital planning,” the bank said.

 

However, the CBN stressed that the temporary measure is not
a substitute for the ongoing recapitalisation programme announced in its March
28 circular.

 

DIVIDEND, BONUS SUSPENSION FOR BANKS UNDER RELIEF

 

CBN also announced restrictions on the use of transitional
reliefs.

 

The regulator said banks benefiting from transitional
concessions are barred from paying dividends, issuing bonuses to directors and
senior management, or investing in foreign subsidiaries.

 

“These restrictions remain in force until capital levels and
provisioning are fully restored to regulatory compliance,” CBN added.

 

 

QUARTERLY DISCLOSURES, CAPITAL RESTORATION PLANS REQUIRED

 

In a bid to enhance transparency and regulatory oversight,
the CBN directed banks to submit detailed quarterly disclosures, which will
include provisioning status and reconciliation of affected credit exposures.

 

 

The quarterly disclosures are also expected to cover CAR
calculations with and without transitional reliefs, classification migration
data for restructured or impacted loan facilities, and comprehensive disclosure
of AT1 instruments, including issuance terms, usage, and related conditions.

 

“The submission should reach the Director of Banking
Supervision, not later than 10 working days following the end of the quarter
with effect from June 30, 2025,” the circular added.

 

 

In addition, the regulator asked all affected banks to
prepare a comprehensive capital restoration plan, detailing proposed strategies
for restoring full compliance.

 

The CBN said the plan must also be submitted no later than
10 working days after the end of each quarter, starting from June 30, 2025.

 

The institution said it must also include cost optimisation,
asset reduction, risk transfers, and possible business model changes.

 

The bank added that the plan must cover the entire period
until full normalisation of capital and asset quality indicators are achieved.

 

“Plans submitted will be subject to regulatory review and
approval, and will form the basis for continuous supervisory monitoring and
engagement throughout the transition,” the apex bank said.

 

SUPERVISORY ENGAGEMENT AND COMPLIANCE

 

The CBN urged banks to engage proactively with the banking
supervision department throughout the transition process.

 

The regulator also advised banks to demonstrate full
commitment to the measures, uphold prudential standards, and contribute to the
overall health and resilience of the Nigerian financial system.

Source: CBN ends forbearance measures, asks banks to provide capital restoration plan

 - NigerianEye
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