Key highlights
- The Central Bank of Nigeria (CBN) has released regulatory guidelines for banks and financial institutions looking to change their operating licenses.
- The guidelines outline a standardized procedure for application and eligibility criteria, as well as regulatory requirements for obtaining necessary approvals.
- The guidelines are expected to promote transparency, and consistency, and strengthen the regulatory environment, boosting investor confidence and promoting healthy competition.
The Central Bank of Nigeria (CBN) has issued an exposure draft on the regulatory guidelines for banks and other financial institutions seeking to change their operating licences.
An exposure draft is a preliminary version of a proposed regulation or standard that is released for public comment and review before it is finalized and implemented.
In the context of the Central Bank of Nigeria’s regulatory guidelines for banks and other financial institutions seeking to change their operating licenses, the exposure draft provides an opportunity for interested parties to review and comment on the proposed guidelines before they are finalized and implemented.
The 16-page exposure draft guidelines outline the procedure for conversion, re-categorization, and re-designation of licence types, as well as the need to comply with relevant licensing requirements.
The guidelines apply to deposit-taking financial institutions, including commercial banks, merchant banks, non-interest banks, microfinance banks, primary mortgage banks, payment service banks, and any other institution designated by the CBN.
To be eligible, institutions must be under the supervisory purview of the CBN, have no adverse supervisory report to their application, and meet any other conditions stipulated by the CBN. For conversion, institutions must have been in operation for at least five years.
The guidelines also have prohibitions and restrictions applicable to eligible banks and other financial institutions applying for conversion or re-categorization. These include no expansion or reduction of their banking network, no new products or services, and no new strategic banking activities, except in line with the institution’s conversion strategy submitted to the CBN.
The guidelines also provide specific requirements for non-interest financial institutions and primary mortgage banks (PMB) seeking to convert to another licence type. PMBs must provide evidence of divestment from mortgage loans under the National Housing Fund (NHF) and a plan to divest from all non-permissible real estate businesses. The divestment must be concluded within 18 months from the date of the grant of approval-in-principle.
What this means
The issuance of regulatory guidelines for the change of operating licenses for banks and other financial institutions in Nigeria is a significant development in the banking sector.
- It provides a clear framework for banks and other financial institutions seeking to change their operating license types through conversion, re-categorization, and re-designation.
- The guidelines when finalized will provide a standardized procedure for the application process and eligibility criteria for banks and other financial institutions that want to change their license type.
- It also outlines the regulatory requirements that they need to comply with to obtain the necessary approvals.
- The introduction of these guidelines is expected to bring about more transparency and consistency in the process of changing operating licenses for banks and other financial institutions in Nigeria.