CBN pegs minimum deposit in merchant banks at N100m




In its continued effort at reforming the financial system, the Central Bank of Nigeria (CBN) has reviewed its guidelines for licensed specialised institutions. Specifically, the new guidelines stipulate that merchant banks take deposits in an amount not below N100 million.


“In furtherance of the strategic imperatives being implemented by the CBN to reform the Nigerian financial system, the CBN is conducting a comprehensive review of the guidelines for the licensing of specialised institutions which include non-interest banks, Primary Mortgage Institutions (PMIs), microfinance banks, development banks and discount houses”, said the CBN in the reviewed guidelines. According to it, “the deposits shall be taken per tranche, or such other minimum amount as may be prescribed by the CBN from time to time”, said the apex bank.


Wale Abe, chief executive officer of Financial Market Dealers Association (FMDA) of Nigeria, told BusinessDay in a telephone interview that the move is a good one that will ensure these specialised institutions actually delivered on their set goals. According to him, there is the wholesale banking and the retail banking. “But merchant banks belong to the wholesale side of banking”, he said.


He explained that ordinary individuals should not be the ones expected to lodge deposits with merchant banks apart from high net worth individuals. James Igolo, a retired banker said the inability to differentiate between specialised banking and normal banking has so far plagued the financial sector over the years and inhibited economic growth generally.


The reviewed guideline states that licensed merchant banks are also expected to provide finance and credit facilities to non-retail customers; 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, or any other laws and CBN Regulations made pursuant thereto and act as issuing house, or otherwise manage, arrange or coordinate the issuance of securities, for or on behalf of any person, subject to the provisions of Banks and other Financial Institutions Act (BOFIA).


They are also expected to provide underwriting services with respect to equity issuance of securities, subject to the provisions of BOFIA, and prior notification in writing to the CBN, provide treasury management services including the provision of money market, fixed income, and foreign exchange investment on behalf of clients, provide financial, consultancy and advisory services relating to corporate and investment matters, for a fee. Provide asset management services, including fund and portfolio management services, act as a dealer of securities for its own account, and for the account permitted by the Central Bank of Nigeria (CBN) in pursuance of one of its objectives to promote a sound financial system in Nigeria as deemed it necessary to expound upon licensing conditions for Merchant Banks, with the aim of providing clarity to the market on the terms on which merchant banking business may be conducted.


It added that the framework for primary mortgage institutions is being reviewed and finalised in terms of operations and funding for the mortgage sector. According to it, Primary Mortgage Institutions (PMIs), microfinance banks, development banks and discount houses shall continue to perform their specialised roles within the framework of existing guidelines pending the issuance of revised guidelines by the CBN.


Olusola Dada, a building engineer, said there will be more available houses if the mortgage institutions are run properly and with enough capital base to embark on building projects.






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