CBN Clarifies Contract Suspension Rules for Troubled Banks

The Central Bank of Nigeria (CBN) issued a circular on Wednesday, providing guidance on the suspension of contractual obligations for troubled banks, specifically interpreting sections 34(2)(b) and 40(2) of the Bank Financial Institutions Act 2020. The guidance sets a maximum suspension period of two business days for certain contractual obligations during the resolution of failing banks.

This clarification addresses the uncertainty faced by financial institutions and their counterparts regarding financial contracts. The circular, issued by Okei Umeano, Director of the Financial Market Department, takes immediate effect and aims to enhance the management of commercial risks.

It specifies that the suspension of payment and delivery obligations will not exceed two business days from the date of the written notice issued by the CBN Governor. The guidance is part of the CBN's efforts to preserve financial stability and clarify the treatment of contractual obligations when exercising statutory resolution powers over troubled banks.