The Central Bank of Nigeria (CBN) has directed all Development Finance Institutions operating in the country to henceforth meet at least 10 per cent leverage ratio, stressing that their Special Purpose Vehicles (SPVs) must be disclosed before seeking approval for another.
The Director, Other Financial Institutions Supervision Department, CBN, Mrs. Tokunbo Martins in a circular on Tuesday said, DFIs are required to, “Meet a consolidated leverage ratio of at least 10 per cent [Common Equity: Total Assets (on and off-balance sheet inclusive)] at all times.”
Other she required from DFIs include “report on the financial soundness indicators/prudential ratios of the DFI calculated on a solo and consolidated basis. Present for approval, its audited accounts along with that of the SPVs on a consolidated basis.”
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According to the circular, DFIs are required to submit returns on all SPVs including details of ownership, governance structure, statements of assets and liabilities, income and expenditures, project (s) status possible risk exposure and mitigate, along with own regulatory returns to the apex bank.
“Finally, DFIs are required to note that, approval of new SPVs shall depend on the successful performance of earlier approval ones and the meeting of the consolidated prudential ratios, leverage ratio, and business objectives at all times.
“A consolidated risk-based examination of all subsidiaries and/or SPVs will be conducted on a periodic basis.”
The circular title, establishment and operation of subsidiaries and special purpose vehicles with reference number OFI/DIR/GEN/20/349, signed by Martins said, “We have noted the spate of requests from DFIs for special regulatory approvals to operate SPVs in furtherance of the operational objective. it is important that DFIs are transparent in their financial reporting and remain focused on their case objectives.
“In this regard, DFIs are henceforth required to provide comprehensive disclosures on all subsidiaries and SPV operations. in the same vein, the same regulatory standards that apply to the parents DFI will apply to the subsidiaries and/or SPV.”
She maintained that “failure to comply with these requirements would be viewed as a violation of the provisions of the DFIs guidelines, and would be appropriately sanctioned.”
Samson Oyedeyi
