GLOBAL STANDARD INSTRUCTION (GSI)
On the 13th day of July 2020, the Central Bank of Nigeria released a circular to all Banks and Other Financial Institutions on the Operational Guidelines on Global Standing Instruction (GSI) – Individual. This guideline is to take effect on the 1st day of August 2020. The aim of the GSI is to facilitate an improved credit repayment culture, reduce non-performing loans in the Nigerian Banking System, and to watch-list consistent loan defaulters.
Eligible Accounts and Organisations.
The eligible account types that qualify for the GSI are – Individual Savings Accounts, Individual Current Accounts, Individual Domiciliary Accounts, Investment/Deposit Accounts (Naira & Foreign Currency), Electronic Wallets and related Joint accounts.
For an organization to participate and benefit from the GSI, it must a Financial Institution duly licensed by the Central Bank of Nigeria, it must have adequate IT infrastructure to meet all the connectivity and protocol requirements at NIBSS and CBN, it must provide access to customers’ NUBAN accounts and it must execute the GSI Master Agreement with NIBSS with a copy sent to CBN. The Chief Risk Officer and the Chief Information Technology Officer shall be accountable for the GSI and shall ensure completeness, integrity, accuracy and timeliness of the GSI processes consistently.
Duty of Creditor Banks.
The Creditor Bank shall ensure that borrowers are properly educated about the GSI mandate and its implications and the borrower shall execute a GSI mandate in hard copy or digital form, the Borrower should understand the terms and conditions of the mandate before execution and should ensure that all qualifying accounts are linked to his/her BVN. The Creditor Bank should enshrine same in their loan application process, review and validate the GSI mandate instrument prior to loan disbursement, indemnify NIBSS and other Participating Financial Institutions from all liabilities that may arise from inappropriate use of the GSI infrastructure, retain copies of physical or digital version of the executed GSI mandate and to provide same when required, ensure that the GSI Trigger Amount is only for outstanding Principal Amount and Accrued Interest (excluding ANY Penal Charges), comply with CBN’s Prudential Guidelines as it applies to classification of loans and the MD/CEO shall routinely update the Board of Directors on the GSI process as it relates to frequency of use and amounts recovered or released.
The following transaction reports shall be provided for GSI transactions:
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: GSI Transaction ID, total amount recovered, any other information deemed relevant.
Reports to the CBN – Participating Financial Institutions – PFIs are required to submit monthly returns (including NIL) to the CBN, capturing the following: Total Volume of Triggers (the count shall be by BVN and CRMS Reference No.), total amount triggered; and total amount recovered, cover letter to be signed by at least the Chief Risk Officer or Chief Compliance Officer.
Breaches and Penalties.
There are a number of GSI related breaches and penalties, one of which is: Where a Creditor Bank activates a Global Standing Instruction mandate in error (including when it is inconsistent with Prudential Guidelines) – The Creditor Bank assumes ALL liability thereto, the erring Creditor Bank shall pay a flat fine of N500,000.00 per incident, associated GSI charges borne by the Creditor Bank shall not be refundable.
The GSI is a welcome development and should be employed by Banks. However, it is important that the GSI guideline is fully complied with. While the Chief Risk Officer and Chief Technology officer are saddled with the responsibility of effective compliance with the GSI, loan officers, operations, legal and other departments also have key roles to play in incorporating the GSI mandate in loan agreements and educating borrowers of existence and the legal implication of the GSI.