3/10/2018/CBN
Introduction
The aim of this Guidance Notes is to achieve transparency and promote market discipline by allowing market participants, particularly the Investment Account Holders (IAHs), to access relevant, reliable and timely information on risk exposures and risk management policies and procedures of a NIFI. This document sets out the disclosure requirements with respect to procedure, frequency and content of information to be disclosed.
1.1 General Disclosure Principle
Non-Interest Financial Institutions (NIFIs) shall have a formal disclosure policy approved by the board of directors that addresses the NIFIs’ approach for determining what disclosures it will make and the internal controls over the disclosure process. In addition, NIFIs shall implement a process for assessing the appropriateness of their disclosures, including validation and frequency.
Also, NIFIs shall have a Governance Committee to oversee governance issues relating to IAHs so as to enhance the transparency of returns and risks and of the underlying factors that affect them, as required by CBN Guidelines on Income Smoothing and Management of Profit Sharing Investment Accounts. For smaller and less complex NIFIs, the function of the Governance Committee can be assigned to an existing Board Committee (such as Board Audit Committee or Board Finance and General Purpose Committee) in liaison with the Advisory Committee of Experts (ACE).
2.0 Disclosure Requirements
2.1 Organization of Information and Limitation of Obligations
The information whose disclosure is governed by this Guidance Notes is listed in Annex A.
2.2 Content and Procedures for Disclosing Information
NIFIs shall disclose information relating to their core activities, risks profiles and methodologies used in risk management.
NIFIs are expected to make adequate disclosure consistent with their organizational complexity and the type of business they engage in, taking into account their internal reporting systems to the board and management.
2.3 Disclosure Eligibility Requirements
For NIFIs that adopt internal systems to calculate capital requirements for credit, market and operational risks and for those using credit risk mitigation techniques, compliance with specific disclosure requirements (Disclosure Eligibility Requirements) shall be a necessary condition for the recognition of such approach and the effects of such techniques for regulatory capital purposes. These disclosure requirements are marked by an asterisk in the annexed tables.
2.4 Derogation from Disclosure Requirements
NIFIs may omit the disclosure of information that is not considered material, with the exception of information that represents a disclosure eligibility requirement. 8. In exceptional cases, NIFIs may omit the disclosure of proprietary or confidential information (including information that represents a disclosure eligibility requirement), provided that they specify the information that is not disclosed and the reasons for non-disclosure, and publish more general information on the matter in question.
2.5 Medium and frequency of disclosure
Information on qualitative and quantitative disclosures shall be made through NIFIs’ website, prospectuses, flyers and in printed audited financial statements.
NIFIs shall make adequate pronouncement on the means of disclosure in their financial statements.
i.Disclosures shall be published on a bi-annual basis and within thirty days of publishing the financial statements. However, for NIFIs with stable Composite Risk Rating (CRR) of “Low” and “Moderate” other than domestic systemically important NIFIs, annual reporting will be acceptable.
Domestic systemically important NIFIs may be required to publish information on a more frequent basis in recognition of their level of business, international affiliations and financial sectors dynamics.
2.6 Organization and controls
NIFIs shall adopt suitable organizational arrangements to ensure the compliance with disclosure requirement under this Guidance Notes. Board and management shall independently assess and verify the quality of information. The solutions adopted shall form part of the NIFI’s system of internal controls.
Within this framework, NIFIs shall establish appropriate specific procedures for verifying disclosures that are yet to be subjected to verification by external auditors or the CBN.
