Treatment of Toxic Asset by Deposit Money Banks in Nigeria: A Review of Literature
Keywords:
AMCON, Balance Sheet, CBN, DMBs, Toxic AssetsAbstract
This study examines the treatment of toxic assets in the balance sheets of Deposit Money Banks (DMBs) in Nigeria from the Central Bank of Nigeria’s (CBN) perspective. In the course of the study, a content analysis on the descriptive research method was employed and the methods of data collection were through secondary sources such as documents relating to toxic assets treatment as well as the provisions of the CBN prudential guidelines for DMBs in Nigeria following the incorporation of an asset management corporation. The findings of this study disclosed, among others, that the CBN has a good perspective on toxic assets which are classified into specialized and non-specialized loans and subcategorized based on objective and subjective criteria for provision purposes. The study also revealed that the toxic assets are represented as assets in the balance sheet and upon sale (without recourse to the seller) are excluded from the balance sheet and regarded as disposal. The profit or loss thereof is recognized by the selling bank when the transaction is completed. Consequently, a recommendation that the DMBs be left to deal with the toxic assets that can be made re-performing without the need to transfer to the Asset Management Corporation of Nigeria (AMCON) was proposed.