CBN ISSUES FRESH GUIDANCE ON TROUBLED BANKS’ CONTRACT SUSPENSIONS

The Central Bank of Nigeria (CBN) has issued new guidelines to streamline the suspension of contracts and services by banks facing financial difficulties, aiming to protect customers, maintain financial stability, and minimise disruptions in the banking sector.

The directive, released on Friday, provides clear procedures for troubled banks to follow when suspending contracts, including advance notice to customers, regulatory approval, and measures to safeguard depositors’ funds and essential services. It also outlines conditions under which contracts can be terminated or restructured without triggering systemic risks.

CBN Governor, Mr. Olayemi Cardoso, said the fresh guidance was necessary to address gaps observed during previous bank resolutions. “We must balance the need to protect the system with fairness to customers and counterparties. This framework ensures transparency and predictability in handling distressed institutions,” Cardoso stated.

The guidelines mandate banks to notify affected parties at least 30 days before any suspension, except in cases of extreme urgency approved by the regulator. They also require the establishment of alternative service arrangements and the preservation of critical data and customer records during the process.

Banking industry stakeholders welcomed the development, describing it as a proactive step towards strengthening resolution mechanisms. The President of the Bankers’ Committee, Mr. Chinedu Okoro, noted that the rules will reduce uncertainty and build confidence in the sector.

Consumer protection groups, however, called for stricter oversight to prevent abuse of the guidelines. “While we support the CBN’s efforts, there must be robust mechanisms to prevent banks from using these provisions to evade legitimate obligations to customers,” said a representative of the Consumer Protection Council.

The new directive comes amid ongoing reforms in the banking industry aimed at enhancing resilience and addressing vulnerabilities exposed by recent economic challenges. Analysts believe the guidance will help maintain stability while ensuring that troubled banks can be resolved in an orderly manner without undue hardship on the public.

The CBN urged all deposit money banks to familiarise themselves with the new rules and ensure full compliance to avoid sanctions.