Banks seeking licence recategorisation restrained from entering new deals

•Applicants mandated to show proof of IT infrastructure

The Central Bank of Nigeria (CBN), yesterday, issued general guidelines on processes; requirements and qualifications expected from commercial, microfinance and primary mortgage banks seeking licence recategorisation or conversion.

The regulatory guide signed by the Director of the Financial Policy and Regulation Department, Chibuzo Efobi, also applies to merchant, non-interest, and payment service banks approaching the CBN for a change of the line of business.

According to the documents, operators who have applied for conversion of the licence category are prohibited from expanding, reducing their current banking network, rolling out new products or executing new strategic banking activity, while the application is being processed.

But the normal settlement of rights and obligations would continue until fully executed in accordance with existing terms and conditions, the CBN noted.

The applicants are also prohibited from taking any new business decision after the conversion process has commenced “except in line with the bank’s conversion strategy submitted to the CBN”.

Perhaps, owing to the increasing importance of digital payment support, an applicant for a change of licence, irrespective of the category, is required to show proof of IT infrastructure as a necessary requirement for considering an entry.

Bank customers have faced Herculean tasks settling transactions through digital media in the past weeks, while the CBN scaled up cashless policy implementation amid the naira redesign. Thousands of depositors continue to visit banking halls ostensibly to sort out failed transactions, which have increased owing to poor IT support.

In its requirement, the bank stated: “Any bank or OFI seeking to change its licence type shall communicate its desire in writing to the Director of its current supervisory department. The application shall be accompanied by a business plan duly approved by the financial institution’s shareholders at an Annual General Meeting or Extra Ordinary General Meeting and the Board of Directors. It shall contain detailed processes, procedures, timelines and milestones regarding the proposed change.”

Applications are to be supported with documents showing the following: board resolution, the rationale for the change, business case, vision/mission/strategy, governance structure, evidence of Shariah Compliance (where applicable) and risk management framework. Other subject matters to be covered are financial projection and CBN approvals for any change(s) in management/board/shareholding since the issuance of the extant licence.

“As a requirement to the grant of final approval, the CBN shall conduct an inspection of the premises and facilities to ascertain their suitability or otherwise and confirm the authenticity of all relevant documents submitted by the bank or OFI (where applicable).

“A bank or OFI that converted to another licence type shall, through a letter, inform the relevant supervisory department of the CBN of its readiness to commence operations and such information shall be accompanied by one copy each of the following: opening statement of affairs signed by external auditors and at least two directors with their names and designation and minutes of a pre-commencement board meeting,” the bank said.

The document also listed specific requirements applicable to different categories – commercial, merchant, microfinance, payment service and primary mortgage banks – an existing financial institution is converting to. Among other criteria, applicants are expected to meet the capitalisation of their target categories and show readiness to comply with the codes of conduct practice.