GSI: Lawyer advocates legslative intervention to reduce non-performing loans

A legal practitioner, Mr Kemi Pinheiro, on Wednesday in Lagos, called on the National Assembly to come up with a robust legislative intervention that would aid the reduction of Non-Performing Loans (NPLs) in Nigeria.

Pinheiro, the Principal Partner, Pinheiro Legal Practitioners, made the call at the 20th National Seminar on Banking and Allied Matters for Judges.

The two-day seminar had the theme:“The Judiciary and the Financial Services Industry in the New Normal: Challenges, Innovation and Regulations”.

Pinheiro spoke on the topic: Global Standing Instruction (GSI) Mandate: “Implications for Banks, Customers and the Judiciary”.

GSI is basically an instruction (written or digital) executed by a borrower being an account holder in a participating financial institution, authorising the recovery of an amount specified by the creditor from any/all accounts maintained by the account holder across all participating financial institutions.

He urged Nigeria to replicate what jurisdictions such as Ghana, Australia and India, were doing to reduce NPLs in their countries.

According to Pinheiro, these jurisdictions use legislative interventons to mitigate NPLs, rather that regular guidelines, and each qualify the solutions in form of Insolvency Act.

“We need a wholesome legislative intervention; legislations as opposed to mere guidelines have been used in the process of reducing non-performing loans.

“This approach is commendable and has yielded results in other jurisdictions.

” It’s in fact saddening that in Nigeria there is no uniform insolvency code or law; all we have are pockets of guidelines, case-law and outdated regulatory pieces of legislation.

“The AMCON Act tries to mitigate some of this but the Act only relates to cases involving AMCON.

“Today, we do not have any existing insolvency law in Nigeria; apart from giving validity to the provision of GSI, the legislation takes compliance of guidelines outside the purview of mere procedural issues to become substantive issues that must be complied with, otherwise all actions carried out in contravention will be rendered null and void,” he said.

Pinheiro observed that the GSI guideline was of retrospective effect and activation of the GSI mandate might constitute an usurpation of the powers of the court.

He also perceived that the guidelines would act beyond the powers of the CBN and as such, recommended the amendment of the GSI guidelines to bring it in conformity with some of the observations highlighted.

Pinheiro called on CBN to rejig its supervisory role in the approval of loans by financial institutions..

He said that most loans had remained non-performing due to the failure of bank officials to comply with the minimum required standard.

Pinheiro said also that a robust disciplinary process with commensurate sanctions needed to be in place to punish erring bank officials who failed to apply the standard procedure of due diligence.

He suggested that such process should include advertorial on the findings made against the erring officials to serve as deterrent to others.

The Founder of Coscharis Group, Dr Cosmos Maduka, advised that the GSI guidelines be extended to every agent responsible in creating such loans, urging that lopeholes be tightened and looked at holistically.

“So I will urge the apex bank to extend the GIS to corporate accounts and bring in the third party which is the most important aspect of it.

“The GSI should be extended to government agencies and parastatals who are mostly responsible to some of these loans.

“The government sector cannot be taking people’s product without good plan of paying; because most of the loans in the bank have been defunct as a result of the other party not keeping to its contractual obligation.

“It will be so unfair to hold only one person responsible,” he said.

Prof. Olusesan Oliyide, a Professor of Business Law, Olabisi Onabanjo University, Ago- Iwoye, Ogun State, said that the GSI guidelines which sought to regulate banker and customer relationship was a unique contract.

“I wish to submit that the nature of the contract between the banker and the customer is very unique because unlike ordinary contract , it has very strong macro-economic implications which necessitates some state intervention by way of the GSI guidelines of the CBN,” he said.

Supreme reports that Justice Raliatu Iyabo Bola-Adebiyi, from the Lagos State Judiciary also spoke on the topic.

The seminar was organised by the Chartered Institute of Bankers of Nigeria (CIBN), in collaboration with the National Judicial Institute, under the auspices of the Bankers Committe of CBN.