By Richard ABANGWU InvestAdvocate

Lagos (INVESTADVOCATE)-The Central Bank of Nigeria (CBN) Thursday said it will set a N5.0 billion minimum Capital requirement for Mortgage Banks.

This is contained in CBN’s Circular affirming it has approved an exposure draft of the regulatory and supervisory framework for the operations of a mortgage re-finance company (MRC).

The Circular dated March 13 2013 was signed by Olufemi Fabamwo, Director, Other Financial Institutions Supervision Department.

“The framework provides for the licensing and establishment of a MRC as a specialised second-tier institution, which would provide short-term liquidity, long-term funding and/or guarantees to mortgage originators and housing finance lenders,” the Circular said.

The CBN said the establishment of an MRC is primarily aimed at increasing the liquidity within the mortgage sub-sector and availability of mortgage credit in Nigeria, reduce mortgage and related costs, and make residential housing more affordable.

Also, the CBN says this regulatory framework is designed to ensure that the MRC operates in a safe and sound manner, on internationally accepted principles, standards and best practice in mortgage liquidity facilities.

“The regulatory framework is drawn pursuant to the provisions of the Central Bank of Nigeria (CBN) Act 2007, Banks and Other Financial Institutions Act (BOFIA) CAP B3, Laws of the Federation of Nigeria (LFN) 2004, other relevant Laws, and extant CBN Guidelines and Circulars” the CBN said.

On the Board of Directors (BOD), the CBN said the ultimate responsibility for every MRC’s operations shall be vested in its Board of Directors.

According to the CBN, the number of Directors on the board of the MRC shall be a minimum of seven (7) and a maximum of fifteen (15).

Also, the Non-Executive members must be at least twice the number of the Executive Directors at any point in time.

Further to these, the Bank shall approve the appointment of each Director who shall meet the qualifications for licensed Bank Directors as specified in the BOFIA, or as may be specified by the Bank from time to time.

The CBN said the Executive Directors of the MRC shall hold office for a fixed term of not more than 5 years and such term may be renewed only once, while Non-Executive Directors shall serve for a fixed term of not more than 4 years “and such term may be renewed only twice” the Exposure Draft said.

“For the avoidance of doubt, the maximum tenure of an Executive Director shall not exceed a total of 10 years while a non-executive director shall not serve for periods exceeding 12 years in total.

Any Executive Director who has served two 5-year terms may equally serve as Managing Director, if so appointed, for the maximum of two 5- year terms (a combined maximum of 20years)”the CBN said.

Click here to download full Exposure Draft-CBN

(Reporting by Richard ABANGWU, editing by Peter OBIORA)