By Gabriel Omoh, Business Editor
Banks operating in the country will no longer be allowed to undertake businesses or own subsidiaries outside their core function of financial intermediation.

CBN boss

Under the modified universal banking licence regime that will come into effect in the last quarter of 2010, Nigerian commercial banks will no longer be permitted to carry out insurance underwriting; loss adjusting services; re-insurance services; Asset Management services; Issuing House and Capital Market underwriting services;

Investment in equity or hybrid-equity instruments, save and except for the investments permissible under BOFIA; Proprietary trading, save as permitted by these regulations; provision of financial advisory for a fee; and any other business activity that may be restricted by the CBN from time to time. These facts are contained in the new set of rules for commercial banks signed by the CBN governor Sanusi Lamido Sanusi.

Almost all Nigeria’s 24 banks have set up one subsidiary or the other in the listed areas that will not be permitted under the new regime. Specifically, many of the banks have grown their non- interest income on fee-based services that the apex bank regulation now forbids.

According to a new set of rules signed by Mallam Sanusi Lamido Sanusi, Governor, Central Bank of Nigeria which the CBN will start to implement soon, the CBN said:

“Following the recent repeal of the Universal Banking Guidelines, and the imminent exchange of Universal Banking Licences by banks for licences permissible under the Banks and Other Financial Institutions Act Cap. B3 Laws of the Federation of Nigeria 2004, the Central Bank of Nigeria in pursuance of one of its objectives to promote a sound financial system in Nigeria, has deemed it necessary to expound upon licensing conditions for commercial banks with the aim of providing clarity to the market on the terms on which commercial banking business may be conducted.

“In exercise of its powers under Section 57(1) Banks and Other Financial Institutions Act Cap. B3 Laws of the Federation of Nigeria 2004, and other enabling powers in that regard, the Governor of the CBN hereby issues the following guidelines with respect to the grant of licences, authorisations and scope of operations for commercial banks.

“These regulations shall come into force on a date to be fixed in 2010. As from the date thereof: a commercial banking licence may be issued by the governor upon such terms and conditions which authorise the operation of a Commercial Bank on a regional, national or international basis.

For the avoidance of doubt: “A Commercial Bank with regional banking authorisation shall be entitled to carry on its banking business operations within a minimum of six and a maximum of twelve contiguous states of the federation, lying within not more than two geo-political zones of the federation, as well as within the Federal Capital Territory while “A Commercial Bank with national banking authorisation shall be entitled to carry on its banking business operations within every state of the federation”. and “a Commercial Bank with international banking authorisation shall be entitled to carry on its banking business operations within all the states of the federation, as well as to establish and maintain offshore banking operations in jurisdictions of its choice, subject to the approval of the CBN and compliance with regulatory requirements of host country”.

The news rules further state“Subject to Sections 2 & 5(c) herein, a commercial banking licence shall confer on an operator of the licence, the authority to undertake the following banking business activities and no other: take deposits and maintain current and savings accounts from natural and legal persons; provide retail banking services, including mortgage products; provide finance and credit facilities; deal in foreign exchange and provide foreign exchange services, subject to the requirements of the Foreign Exchange (Monitoring & Miscellaneous Provisions, etc) Act Cap. F35 Laws of the Federation of Nigeria 2004, any other law and CBN Regulations made pursuant thereto; e) Act as a settlement bank, subject to CBN approval;

provide treasury management services including the provision of money market, fixed income, and foreign exchange investment on behalf of clients; provide custodial services such as bailment and safekeeping of documents and other valuables in the ordinary course of banking business; provide financial advisory services which do not require regulatory filings with the Securities and Exchange Commission such as: advising on financing and business strategies and structures, building financial models, writing business plans, conducting private placements, arranging loan syndications and advising on project structures; invest in non-convertible debt instruments; undertake fixed income trading, where duly licensed to act as a Primary Dealer/ Market Maker to trade in securities such as Federal Government bonds, treasury bills, treasury certificates and such other debt certificates as may be prescribed by the CBN from time to time; provide non-interest banking services subject to CBN approval; and such other activities as may be prescribed in writing by the CBN from time to time.

Continuing the new rule said “No Commercial Bank shall be permitted to carry out the following business activities: insurance underwriting; loss adjusting services; re-insurance services; Asset Management services; Issuing House and Capital Market underwriting services; investment in equity or hybrid-equity instruments, save and except for the investments permissible under BOFIA; proprietary trading, save as permitted by these Regulations; provision of financial advisory for a fee; and any other business activities that may be restricted by the CBN from time to time.

It also said “A Commercial Bank authorised to conduct business on a regional basis shall as from the date hereof, and as prescribed from time to time by the CBN: maintain a minimum paid-up share capital of N10 billion or such other amount as may be prescribed by the CBN from time to time; comply with all prudential guidelines and regulations issued by the CBN on the required level of capital adequacy, liquidity and cash reserve; be precluded from carrying out settlement bank activities;

observe all applicable corporate governance standards as may be prescribed by the CBN and other relevant financial service sector regulatory authorities in Nigeria;  design, comply with and implement an internal control framework in accordance with the standard that the CBN may prescribe from time to time; through its Board of Directors report on the implementation and effectiveness of its internal control framework to the CBN within four months after the end of its financial year and the auditors of the In the case of National Commercial Bank it said they “shall be required to include a statement in the annual Audit Report of the National Commercial Bank as to the existence, adequacy and effectiveness or otherwise of such internal control systems; design, comply with and implement a risk management framework which ensures that the Regional Commercial Bank has an appropriate reporting structure, quality, procedure and technology to effectively and adequately identify, measure, monitor and report risks to the CBN, in accordance with any guidelines, circulars or regulations as prescribed by the CBN from time to time; and maintain its books and financial statements in accordance with the Nigerian GAAP, or as prescribed from time to time by the Nigerian Accounting Standards Board, and the CBN.

“A Commercial Bank authorised to conduct business on a national basis shall: maintain a minimum paid-up share capital of N 25 billion or such other amount as may be prescribed by the CBN from time to time; comply with all prudential guidelines and regulations issued by the CBN on the required level of capital adequacy, liquidity and cash reserve; observe all applicable corporate governance standards as prescribed by the CBN and other financial service sector regulatory authorities in Nigeria; design, comply with and implement an internal control framework in accordance with the standard that the CBN may prescribe from time to time;

through its Board of Directors report on the implementation and effectiveness of its internal control framework to the CBN within four months after the end of its financial year and the auditors of the National Commercial Bank shall be required to include a statement in the annual Audit Report of the National Commercial Bank as to the existence, adequacy and effectiveness or otherwise of such internal control systems; design, comply with and implement a risk management framework which ensures that the National Commercial Bank has an appropriate reporting structure, quality, procedure and technology to effectively and adequately identify, measure, monitor and report risks to the CBN in accordance with any guidelines, circulars or regulations as prescribed by the CBN from time to time; and without prejudice to the standards prescribed from time to time by the Nigerian Accounting Standards Board, be required to maintain its books and financial statements in accordance with the IFRS accounting standards, subject to the provisions of Section 28 of BOFIA.

“A Commercial Bank authorised to conduct business on an international basis shall maintain a minimum paid-up share capital of N 50 billion or such other amount as may be prescribed by the CBN from time to time; comply with all prudential guidelines and regulations issued by the CBN on the required level of capital adequacy, liquidity and cash reserve; observe all applicable corporate governance standards as prescribed by the CBN and other financial service sector regulatory authorities in Nigeria; design, comply with and implement an internal control framework in accordance with the standards that the CBN may prescribe from time to time;

through its Board of Directors report on the implementation and effectiveness of its internal control framework to the CBN within four months after the end of its financial year and its auditors shall be required to include a statement in its Report as to the existence, adequacy and effectiveness or otherwise of such internal control systems; be required to design, comply with and implement a risk management framework which ensures that the International Commercial Bank has an appropriate reporting structure, quality, procedure and technology to effectively and adequately identify, measure, monitor and report risks to the CBN in accordance with any guidelines, circulars or regulations as prescribed by the CBN from time to time; and without prejudice to the standards prescribed from time to time by the Nigerian Accounting Standards Board, be required to maintain its books and financial statements in accordance with the IFRS accounting standards.”