Loans: CBN rolls out new directives to banks on collateral registration

In other to tackle unethical practices by banks in collaterals for loan applications, the Central Bank of Nigeria has mandated all banks and other financial institutions in the country to register all collateral used in obtaining loans with the Nigeria Collateral Registry (NCR).

The directive was issued to banks and other financial institutions in a circular by the CBN and signed by its Director, Financial Policy and Regulations Department, Kevin Amugo. The apex bank while informing that the notice-based on-line NCR is now operational and can be accessed at the registry’s website, stated that “all banks and other financial institutions are hereby required to register the security interests in moveable assets with the NCR with effect from Monday July 4, 2016.”

Asides registering all securities with the NCR, the CBN also directed that all financial institutions “conduct search on the NCR as part of the credit assessment and risk management process in order to ascertain the encumbrance status of moveable assets sought to be used as collateral for credit facilities.”

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The CBN in furtherance of its statutory mandate of promoting a sound financial system in Nigeria had issued and gazetted in February 2015 the Registration of Security Interests in Moveable Property by Banks and Other Financial Institutions in Nigeria.

The regulation is targeted at providing a regulatory framework for accessing credit secured with moveable property creating and perfecting security interests and realizing security interests in moveables.

It is also aimed at providing for the establishment and operation of the collateral register and stimulate responsible lending to micro, small and medium enterprises by providing an efficient mechanism for registration of the security interests in moveable assets and realization of such interests in the event of a default.

The NCR is  a platform where all collateral, moveable and immovable collateral  can be registered, thereby removing the risks of some bank customers using the same collateral to access facilities in more than one bank.