In its bid to promote a sound financial system in Nigeria, the CBN hereby issued the guideline on Global Standing Instruction (GSI) to enhance loan recovery across the banking sector. The GSI shall serve as a last resort by a Creditor bank, without recourse to the Borrower, to recover past due obligations (Principal and Accrued Interest only, excluding any Penal Charges) from a defaulting Borrower through a direct set-off from deposits/investments held in the Borrower’s qualifying bank accounts with participating financial institutions.
What this means is that any individual who borrows from a bank and didn't pay as at when due, the account of such individual with other banks will be debited to pay the default in the other bank.
For Example: Kunle borrowed money from Access bank and failed to pay back. Kunle's account with Gtbank, Union Bank of Nigeria will be debited to pay back the loan.
The guideline will be effective from August 1, 2020
Objectives of GSI
The objectives of GSI include:
1) Facilitate an improved credit repayment culture;
2) Reduce Non-Performing Loans (NPLs) in the banking industry; and
3) Watch-listing consistent loan defaulters.
Eligible Account Type for GSI
The following types of accounts qualify for GSI:
a) Individual Savings Accounts;
b) Individual Current Accounts;
c) Individual Domiciliary Accounts;
d) Investment/Deposit Accounts (N & Foreign Currency); and
e) Electronic Wallets.
Stakeholders in GSI
The underlisted are GSI stakeholders:
a. Borrower
b. Creditor Bank
c. Participating Financial Institutions
d. Nigeria Inter-Bank Settlement System (NIBSS)
e. Central Bank of Nigeria (CBN)
Roles and Responsibilities of the Stakeholders
1. Borrower: The Borrower shall:
a) Execute a GSI mandate in hard copy or digital form.
b) Ensure that the terms and conditions of the mandate are clearly understood before execution.
c) Ensure that all qualifying accounts are linked to his/her BVN.
NOTE: In the event that a borrower’s qualifying account which is not linked to his/her BVN is identified, such BVN shall be Watch-Listed.
2. Creditor Bank: The Creditor Bank shall:
a) Ensure that borrowers are properly educated about the GSI mandate and its implications; and enshrine same in their loan application process.
b) Review and validate the GSI mandate instrument prior to loan disbursement.
c) Indemnify NIBSS and other Participating Financial Institutions from all liabilities that may arise from inappropriate use of the GSI infrastructure.
d) Retain copies of physical or digital version of the executed GSI mandate and to provide same when required.
e) Ensure that the GSI Trigger Amount is only for outstanding Principal Amount and Accrued Interest (excluding ANY Penal Charges).
f) Comply with CBN’s Prudential Guidelines as it applies to classification of loans.
g) As a risk management tool, the MD/CEO of each PFI shall routinely update the Board of Directors on the GSI process as it relates to frequency of use and amounts recovered or released.
3. Participating Financial Institutions: The Participating Financial Institutions shall:
a) Execute the GSI Mandate Agreement with NIBSS.
b) Ensure all qualifying accounts are properly maintained and visible to NIBSS on the Industry Customer Accounts Database (ICAD) or by any other service created or provisioned for this purpose.
c) Ensure that accounts in NIBSS’ ICAD are correctly tagged with correct BVN.
d) Ensure and maintain connectivity to the Nigeria Central Switch.
e) Honour ALL balance enquiry and debit advice received from NIBSS for GSI Trigger in accordance with master agreement, including GSI recall instructions.
f) As a risk management tool, the MD/CEO of each PFI shall routinely update the Board of Directors on the GSI process as it relates to frequency of use and amounts recovered or released.
b) Administer the back-end of the GSI services (utilizing NIP protocols) where upon trigger undertakes balance enquiry, debit instructions on identified accounts and completes the GSI operations by instantly transferring the collated funds to the borrowers pre-designated repayment account in the creditor bank.
c) Ensure that the availability of the ICAD database is uninterrupted for PFIs to update.
d) Render periodic reports as may be prescribed by the CBN.
5. Central Bank of Nigeria: The CBN shall ensure uninterrupted availability of the CRMS platform and connectivity to NIBSS platform.
GSI Transaction Reports
The following transaction reports shall be provided for GSI transactions:
1. Report to Creditor Bank: A report detailing outcome of a GSI transaction may be provided to the Creditor bank, upon written request from the Chief Risk Officer (CRO), and shall include the following:
a) GSI Transaction ID
b) Total Amount Recovered.
c) Any other information deemed relevant.
2. Report to Participating Financial Institutions: The report for all GSI Transactions and reversals shall be contained in respective PFIs settlement reports on the CRMS.
3. Reports to the CBN
A) Participating Financial Institutions - PFIs are required to submit monthly returns (including NIL) to the CBN, capturing the following:
1. Total Volume of Triggers (the count shall be by BVN and CRMS Reference No.);
2. Total Amount Triggered; and
3.Total Amount Recovered
4. Cover letter to be signed by atleast the Chief Risk Officer or Chief Compliance Officer
(Soft copies of the returns shall be submitted to GSI-Returns@cbn.gov.ng no later than the 8th day after each month end; in alignment with routine monthly update of CRMS records’ outstanding balances).
B) Nigeria Interbank Settlement System - NIBSS shall provide back-end related report(s) to the CBN in a format and frequency, as may be required.
ACCOUNTABILITY IN PARTICIPATING FINANCIAL INSTITUTIONS
To ensure completeness, integrity, accuracy and timeliness of the GSI processes consistently, the:
a) Chief Risk Officer (CRO) shall be accountable for the appropriateness of the entire GSI process. This shall be in addition to his/her responsibilities under section 6.2 of the Regulatory Guidelines for the Operations of the Redesigned Credit Risk Management System (CRMS).
b) Chief Information/Technology Office (CIO or CTO) shall ensure continuous connectivity to the GSI platform and availability of all internal systems to honour all GSI instructions and protocols (including the tagging of “Unavailable Accounts” for audit log/trail purposes.
NOTES:
1. This does not absolve the PFI’s MD/CEO of the overall responsibility over activities of the bank.
2. Any loan for forbearance review must show evidence of GSI trigger otherwise full provisioning would be required (except where there are CBN permitted waivers).
6.0 PENALTIES Whereas the Chief Risk Officer has overall responsibility for ensuring appropriate use of the GSI infrastructure (consistent with similar oversight of CRMS related activities); below are the specific GSI related breaches/violations and their penalties:
Violation/Sanction
1. Where a Creditor Bank activates a Global Standing Instruction mandate in error (including when it is inconsistent with Prudential Guidelines)
i. The Creditor Bank assumes ALL liability thereto. ii. The erring Creditor Bank shall pay a flat fine of N500,000.00 per incident. iii. Associated GSI charges borne by the Creditor Bank shall not be refundable.
2. Where a PFI incorrectly places a CBN approved restriction on an eligible account in order to shield it from the GSI Trigger and it results in the GSI being unable to either perform an Account Status Check Enquiry or debit the account
i. The erring PFI shall be fined to the tune of the amount in that ‘restricted/shielded’ eligible account (This amount will not be considered as part of any subsequent GSI Trigger Amount, successful or otherwise).
ii. In addition, for each incident, the Chief Risk Officer (CRO) of the erring PFI shall submit a formal explanation letter to the Director Banking Supervision and Director Financial Policy & Regulation Departments.
3. Where a PFI fails to grant the GSI permission to perform an Account Status Enquiry Check/Request.
i. The erring PFI shall pay a flat fine of N100,000.00 (per initial incident and each subsequent repeat request/instruction), regardless of the GSI Trigger Amount. ii. In addition, for each incident, the Chief Information/Technology Officer (CIO/CTO) of the erring PFI shall submit a formal explanation letter to the Director Banking Supervision and Director Financial Policy & Regulation Departments.
4. Where a PFI fails to grant the GSI permission to debit an eligible account
i. The erring PFI shall pay a flat fine of N100,000.00 (per initial incident and each subsequent repeat request/instruction), regardless of the GSI Trigger Amount.
ii. Additionally, the erring PFI shall pay a fine equivalent of the balance in the account shielded from the GSI’s Debit Request, regardless of the GSI Trigger Amount.
iii. For each incident, the Chief Information/Technology Officer (CIO/CTO) of the erring PFI shall submit a formal explanation letter to the Director Banking Supervision and Director Financial Policy & Regulation Departments.
5. Where debits are unsuccessful due to reduction in an amount previously blocked by the GSI (where the Amount Block feature was used). Consequently, where an available balance is identified in an account, the PFI must honour subsequent Amount Block and/or Debit advice
i. This amount shall be paid by the erring PFI to the Creditor Bank.
ii. The erring PFI shall also pay a flat fine of N100,000.00 per incident, regardless of the GSI Trigger Amount.
6. Where an account is debited in error due to a PFI incorrectly tagging an account in NIBSS’ ICAD with the wrong unique identifier
i. The erring PFI primary responsibility shall be to
a. immediately NOTIFY the Creditor Bank of the incident, quoting relevant customer & GSI details;
b. promptly refund the wrongly impacted/debited amount with the same amount of the GSI Debit;
c. ensure no additional charges accrue in same account;
d. bear any other liabilities that may follow thereon.
ii. In addition, the erring PFI shall pay a fine equivalent to the amount erroneously debited to the wrong account.
iii. The creditor bank shall thereafter based on CBN confirmation of i & ii above, return the erroneous amount to the erring PFI.
7. Where the Arbitrator rules against the Creditor Bank for a disputed GSI Transaction
i. The Creditor Bank shall pay an additional fine of N10m or 10% of the disputed sum, whichever is greater.
ii. This shall be in addition to the fines for any erroneous or otherwise disputed transaction.
8. Where a Creditor Bank includes Penal Charge in the GSI Trigger Amount
i. In event of a Successful GSI Trigger, regardless of the amount recovered, the erring Creditor Bank shall refund the full Penal Charge amount to the borrower (with interest calculated using the penal rate from date of GSI trigger to refund date).
ii. In event of both a Successful and Unsuccessful GSI Trigger, the erring Creditor Bank shall pay a fine of N100,000.00 or equivalent of the Penal Charge amount; whichever is greater.
In all cases CBN shall apply the prescribed penalty to the erring Creditor Bank/Participating Financial Institution. An Arbitrator may propose additional sanctions for grievous violations, malfeasance by a PFI and/or disputes arising from other incidents not described here in.
Participation Requirements
Each of the participants in this scheme shall conform to the requirements for admission into the scheme as outlined below:
a) Be a Financial Institution duly licensed by the Central Bank of Nigeria.
b) Adequate IT infrastructure to meet ALL the connectivity and protocol requirements at NIBSS and CBN.
c) Provide access to customers’ NUBAN accounts.
d) Execute the GSI Master Agreement with NIBSS (a copy sent to CBN).
In its bid to promote a sound financial system in Nigeria, the CBN hereby issued the guideline on Global Standing Instruction (GSI) to enhance loan recovery across the banking sector. The GSI shall serve as a last resort by a Creditor bank, without recourse to the Borrower, to recover past due obligations (Principal and Accrued Interest only, excluding any Penal Charges) from a defaulting Borrower through a direct set-off from deposits/investments held in the Borrower’s qualifying bank accounts with participating financial institutions.
What this means is that any individual who borrows from a bank and didn't pay as at when due, the account of such individual with other banks will be debited to pay the default in the other bank.
For Example: Kunle borrowed money from Access bank and failed to pay back. Kunle's account with Gtbank, Union Bank of Nigeria will be debited to pay back the loan.
The guideline will be effective from August 1, 2020
Objectives of GSI
The objectives of GSI include:
1) Facilitate an improved credit repayment culture;
2) Reduce Non-Performing Loans (NPLs) in the banking industry; and
3) Watch-listing consistent loan defaulters.
Eligible Account Type for GSI
The following types of accounts qualify for GSI:
a) Individual Savings Accounts;
b) Individual Current Accounts;
c) Individual Domiciliary Accounts;
d) Investment/Deposit Accounts (N & Foreign Currency); and
e) Electronic Wallets.
Stakeholders in GSI
The underlisted are GSI stakeholders:
a. Borrower
b. Creditor Bank
c. Participating Financial Institutions
d. Nigeria Inter-Bank Settlement System (NIBSS)
e. Central Bank of Nigeria (CBN)
Roles and Responsibilities of the Stakeholders
1. Borrower: The Borrower shall:
a) Execute a GSI mandate in hard copy or digital form.
b) Ensure that the terms and conditions of the mandate are clearly understood before execution.
c) Ensure that all qualifying accounts are linked to his/her BVN.
NOTE: In the event that a borrower’s qualifying account which is not linked to his/her BVN is identified, such BVN shall be Watch-Listed.
2. Creditor Bank: The Creditor Bank shall:
a) Ensure that borrowers are properly educated about the GSI mandate and its implications; and enshrine same in their loan application process.
b) Review and validate the GSI mandate instrument prior to loan disbursement.
c) Indemnify NIBSS and other Participating Financial Institutions from all liabilities that may arise from inappropriate use of the GSI infrastructure.
d) Retain copies of physical or digital version of the executed GSI mandate and to provide same when required.
e) Ensure that the GSI Trigger Amount is only for outstanding Principal Amount and Accrued Interest (excluding ANY Penal Charges).
f) Comply with CBN’s Prudential Guidelines as it applies to classification of loans.
g) As a risk management tool, the MD/CEO of each PFI shall routinely update the Board of Directors on the GSI process as it relates to frequency of use and amounts recovered or released.
3. Participating Financial Institutions: The Participating Financial Institutions shall:
a) Execute the GSI Mandate Agreement with NIBSS.
b) Ensure all qualifying accounts are properly maintained and visible to NIBSS on the Industry Customer Accounts Database (ICAD) or by any other service created or provisioned for this purpose.
c) Ensure that accounts in NIBSS’ ICAD are correctly tagged with correct BVN.
d) Ensure and maintain connectivity to the Nigeria Central Switch.
e) Honour ALL balance enquiry and debit advice received from NIBSS for GSI Trigger in accordance with master agreement, including GSI recall instructions.
f) As a risk management tool, the MD/CEO of each PFI shall routinely update the Board of Directors on the GSI process as it relates to frequency of use and amounts recovered or released.
4. Nigeria Inter-Bank Settlement System: NIBSS shall:
a) Execute the Master GSI agreement between PFIs.
b) Administer the back-end of the GSI services (utilizing NIP protocols) where upon trigger undertakes balance enquiry, debit instructions on identified accounts and completes the GSI operations by instantly transferring the collated funds to the borrowers pre-designated repayment account in the creditor bank.
c) Ensure that the availability of the ICAD database is uninterrupted for PFIs to update.
d) Render periodic reports as may be prescribed by the CBN.
5. Central Bank of Nigeria: The CBN shall ensure uninterrupted availability of the CRMS platform and connectivity to NIBSS platform.
GSI Transaction Reports
The following transaction reports shall be provided for GSI transactions:
1. Report to Creditor Bank: A report detailing outcome of a GSI transaction may be provided to the Creditor bank, upon written request from the Chief Risk Officer (CRO), and shall include the following:
a) GSI Transaction ID
b) Total Amount Recovered.
c) Any other information deemed relevant.
2. Report to Participating Financial Institutions: The report for all GSI Transactions and reversals shall be contained in respective PFIs settlement reports on the CRMS.
3. Reports to the CBN
A) Participating Financial Institutions - PFIs are required to submit monthly returns (including NIL) to the CBN, capturing the following:
1. Total Volume of Triggers (the count shall be by BVN and CRMS Reference No.);
2. Total Amount Triggered; and
3.Total Amount Recovered
4. Cover letter to be signed by atleast the Chief Risk Officer or Chief Compliance Officer
(Soft copies of the returns shall be submitted to GSI-Returns@cbn.gov.ng no later than the 8th day after each month end; in alignment with routine monthly update of CRMS records’ outstanding balances).
B) Nigeria Interbank Settlement System - NIBSS shall provide back-end related report(s) to the CBN in a format and frequency, as may be required.
ACCOUNTABILITY IN PARTICIPATING FINANCIAL INSTITUTIONS
To ensure completeness, integrity, accuracy and timeliness of the GSI processes consistently, the:
a) Chief Risk Officer (CRO) shall be accountable for the appropriateness of the entire GSI process. This shall be in addition to his/her responsibilities under section 6.2 of the Regulatory Guidelines for the Operations of the Redesigned Credit Risk Management System (CRMS).
b) Chief Information/Technology Office (CIO or CTO) shall ensure continuous connectivity to the GSI platform and availability of all internal systems to honour all GSI instructions and protocols (including the tagging of “Unavailable Accounts” for audit log/trail purposes.
NOTES:
1. This does not absolve the PFI’s MD/CEO of the overall responsibility over activities of the bank.
2. Any loan for forbearance review must show evidence of GSI trigger otherwise full provisioning would be required (except where there are CBN permitted waivers).
6.0 PENALTIES Whereas the Chief Risk Officer has overall responsibility for ensuring appropriate use of the GSI infrastructure (consistent with similar oversight of CRMS related activities); below are the specific GSI related breaches/violations and their penalties:
Violation/Sanction
1. Where a Creditor Bank activates a Global Standing Instruction mandate in error (including when it is inconsistent with Prudential Guidelines)
i. The Creditor Bank assumes ALL liability thereto. ii. The erring Creditor Bank shall pay a flat fine of N500,000.00 per incident. iii. Associated GSI charges borne by the Creditor Bank shall not be refundable.
2. Where a PFI incorrectly places a CBN approved restriction on an eligible account in order to shield it from the GSI Trigger and it results in the GSI being unable to either perform an Account Status Check Enquiry or debit the account
i. The erring PFI shall be fined to the tune of the amount in that ‘restricted/shielded’ eligible account (This amount will not be considered as part of any subsequent GSI Trigger Amount, successful or otherwise).
ii. In addition, for each incident, the Chief Risk Officer (CRO) of the erring PFI shall submit a formal explanation letter to the Director Banking Supervision and Director Financial Policy & Regulation Departments.
3. Where a PFI fails to grant the GSI permission to perform an Account Status Enquiry Check/Request.
i. The erring PFI shall pay a flat fine of N100,000.00 (per initial incident and each subsequent repeat request/instruction), regardless of the GSI Trigger Amount. ii. In addition, for each incident, the Chief Information/Technology Officer (CIO/CTO) of the erring PFI shall submit a formal explanation letter to the Director Banking Supervision and Director Financial Policy & Regulation Departments.
4. Where a PFI fails to grant the GSI permission to debit an eligible account
i. The erring PFI shall pay a flat fine of N100,000.00 (per initial incident and each subsequent repeat request/instruction), regardless of the GSI Trigger Amount.
ii. Additionally, the erring PFI shall pay a fine equivalent of the balance in the account shielded from the GSI’s Debit Request, regardless of the GSI Trigger Amount.
iii. For each incident, the Chief Information/Technology Officer (CIO/CTO) of the erring PFI shall submit a formal explanation letter to the Director Banking Supervision and Director Financial Policy & Regulation Departments.
5. Where debits are unsuccessful due to reduction in an amount previously blocked by the GSI (where the Amount Block feature was used). Consequently, where an available balance is identified in an account, the PFI must honour subsequent Amount Block and/or Debit advice
i. This amount shall be paid by the erring PFI to the Creditor Bank.
ii. The erring PFI shall also pay a flat fine of N100,000.00 per incident, regardless of the GSI Trigger Amount.
6. Where an account is debited in error due to a PFI incorrectly tagging an account in NIBSS’ ICAD with the wrong unique identifier
i. The erring PFI primary responsibility shall be to
a. immediately NOTIFY the Creditor Bank of the incident, quoting relevant customer & GSI details;
b. promptly refund the wrongly impacted/debited amount with the same amount of the GSI Debit;
c. ensure no additional charges accrue in same account;
d. bear any other liabilities that may follow thereon.
ii. In addition, the erring PFI shall pay a fine equivalent to the amount erroneously debited to the wrong account.
iii. The creditor bank shall thereafter based on CBN confirmation of i & ii above, return the erroneous amount to the erring PFI.
7. Where the Arbitrator rules against the Creditor Bank for a disputed GSI Transaction
i. The Creditor Bank shall pay an additional fine of N10m or 10% of the disputed sum, whichever is greater.
ii. This shall be in addition to the fines for any erroneous or otherwise disputed transaction.
8. Where a Creditor Bank includes Penal Charge in the GSI Trigger Amount
i. In event of a Successful GSI Trigger, regardless of the amount recovered, the erring Creditor Bank shall refund the full Penal Charge amount to the borrower (with interest calculated using the penal rate from date of GSI trigger to refund date).
ii. In event of both a Successful and Unsuccessful GSI Trigger, the erring Creditor Bank shall pay a fine of N100,000.00 or equivalent of the Penal Charge amount; whichever is greater.
In all cases CBN shall apply the prescribed penalty to the erring Creditor Bank/Participating Financial Institution. An Arbitrator may propose additional sanctions for grievous violations, malfeasance by a PFI and/or disputes arising from other incidents not described here in.
Participation Requirements
Each of the participants in this scheme shall conform to the requirements for admission into the scheme as outlined below:
a) Be a Financial Institution duly licensed by the Central Bank of Nigeria.
b) Adequate IT infrastructure to meet ALL the connectivity and protocol requirements at NIBSS and CBN.
c) Provide access to customers’ NUBAN accounts.
d) Execute the GSI Master Agreement with NIBSS (a copy sent to CBN).