Financial system stability: CBN approves revised banking model


By Stanley Opara and Ifeanyi Onuba   Thursday, 9 Sep 2010


As part of the blue-print for reforming the Nigerian financial system, which includes the enhancement of the quality of banks, financial system stability and evolution of healthy financial sector, the Central Bank of Nigeria has concluded the review of the current universal banking model.


The apex bank, in a statement on Wednesday, said the new rules and guidelines for the new licensing regime was in compliance with the statutory provisions of the Banks and Other Financial Institutions Act regarding the conduct of banking business.


The statement, which was signed by the Head, Corporate Affairs, CBN, Mr. Muhammed Abdullahi, added that the new guidelines included regulation on scope of banking business.


”This repeals the universal banking regime and requires banks to divest from all non-banking business. The guideline defines the new types of banking licences, permitted activities and transition timelines for restructuring,” it said.


The model, according to the apex bank, also covered special banks/institutions such as the primary mortgage institutions, microfinance banks, non-interest banks, development banks and discount houses.


The apex bank said they “shall continue to perform their specialised roles within the framework of existing guidelines.”


According to the statement, all the existing universal banks are required to prepare and submit to the CBN their plans on compliance with the new banking regime not later than 90 days from October 4, 2010.


Consequently, the CBN said it would discontinue the issuance of universal banking licences and prohibit banks from undertaking non-banking activities. It said new licences would be issued to banks to perform banking businesses like commercial banking (regional, national and international); merchant banking, and specialised banking; among others.


The CBN explained, ”The banks should note that the responsibility for ensuring compliance with the guidelines resides with their boards and management while the CBN reserves the right to stipulate additional requirements prior to granting any approval or authorisation.”


The CBN had in March 2010, as part of the ongoing reform agenda, circulated a draft exposure report detailing its intent to modify the current banking model/arrangement and define a new banking licence regime, going forward.


The apex bank, however, said comments from key industry operators/stakeholders were received, considered, adding that this served as input towards the finalisation of the exposure draft document.


Source: The Punch



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