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CBN releases guidelines for new banking model

By Omoh Gabriel
LAGOS — THE Central Bank of Nigeria, CBN, has released the rules and regulation governing the implementation of the modified universal banking model which is billed to take off Monday.
In the new banking model, three classes of banks will be permitted to operate in the country. They include commercial banks, merchant banks and specialised banks.

The CBN in its regulation on the scope of banking activities and ancillary matters No 3, 2010 said in pursuant to its object to promote a sound financial system in Nigeria, CBN has determined that the Universal Banking Model and the resultant expansion of banks into a broad range of financial services, has exposed the banks to higher operating risks, increased the propensity to put depositors’ funds into risky non-banking business, and consequently heightened the risk of f financial system instability.

“And in exercise of the powers conferred upon the Governor of the CBN by Section 57 of the Banks and Other Financial Institutions Act Cap. B3 Laws of the Federation of Nigeria 2004, and other enabling powers in that regard, I , Sanusi Lamido Sanusi , Governor of the Central Bank of Nigeria, save as otherwise herein provided, the provisions of this Regulation shall come into effect on the 15 th day of November, 2010.

“The Universal Banking Guidelines are hereby repealed from the date hereof. Notwithstanding the repeal aforesaid, nothing in this Regulation shall affect the legality, validity and/or the enforce ability of any right, remedy or liability, which may accrue to any person in respect of any act validly undertaken pursuant to a Universal Banking Licence between the commencement date of the Universal Banking Guidelines and the Effective Date.

“The CBN in December 2000 vide the Universal Banking Guidelines, authorised banks to engage in non-core banking financial activities, either direct ly as part of banking operations, or indirect ly through designated subsidiaries. The Universal Banking Guidelines aforesaid also expatiated the def inition of banking business under BOFIA, and introduced a uniform licensing regime for banks which resulted in the fusion of the diverse and specialised banking model into the uniform universal banking model .

“From the date hereof, all pending applications for any authorisation, approval and/or consent pursuant to the Universal Banking Guidelines, except those relating to core banking activities permitted under this Regulation, shall be deemed withdrawn. Definition of Banking Business From the effective date, the definition of banking business shall be as contained in Section 66 BOFIA.

“From the effective date, the only types of banks that will be permitted to carry on banking business in Nigeria shall be limited to the following types as contemplated under BOFIA: Commercial banks; Merchant banks; and Specialised banks, which include non-interest banks, micro-finance banks, development banks and mortgage banks.

“Accordingly, from the effective date, no bank in Nigeria shall be licensed to operate as a bank other than as one of the types specified in Sect ion 4(1). The commercial banks refer red to in Sect ion 4 (1) (a) may be authorised by the CBN to carry on banking business on a regional, national or international basis in accordance with rules, regulations, and guidelines on licensing, authorisation, operation and conduct of business that the CBN may issue from time to time.

“The non- interest banks referred to in Section 4 (1) (c) may be authorised by the CBN to carry on banking business on a regional or national basis in accordance with rules, regulations, and guidelines on licensing, authorisation, operation and conduct of business that the CBN may issue from time to time.”


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