By Hamisu B.S.
The Central bank of Nigeria has observed the frequent requests from Development Finance Institutions (DFls) for special regulatory approvals to operate special purpose vehicles (SPVs) in furtherance of operational objectives. And the need for the DFls to be transparent in their financial reporting and remain focused on their core objectives.
In a circular to all DFls, CBN stated henceforth DFIs are required to provide comprehensive disclosures on all subsidiaries and SPV operations. In the same vein, the same regulatory standards that apply to the parent DFI will apply to the subsidiaries and/or SPV.
The circular sign by Director, Other Financial Institutions Supervision Department Mr. Tokunbo Martins stated DFls are required to:
- Submit returns on all SPVs including details of ownership, corporate governance structure, statements of assets and liabilities, income and expenditures. project(s) status, possible risk exposure and mitigants, along with own regulatory returns.
- 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 SPV5 on a consolidated basis.
- Meet a consolidated leverage ratio of at least [Common Equity: Total Assets (On and Off-Balance Sheet inclusive)) at all times.
Central bank of Nigeria also, reminded the DFls that approval of new SPVs shall depend on the successful performance of earlier approved ones and the meeting of the consolidated prudential ratios, leverage ratio and business objectives at all times. While a consolidated risk-based examination of all subsidiaries and/or SPVs will be conducted on a periodic basis.
Failure to comply with these requirements would be viewed as a violation of the provisions of the DFls’ Guidelines, and would be appropriately sanctioned.