Before a bank will change the way it offers service and other things, there are new guidelines that it must follow.
The Central Bank of Nigeria (CBN) released a new policy to guide this process.
According to the CBN, the policy is binding on commercial banks, mortgage banks, microfinance banks and Other Financial Institutions (OFIs).
The requirements for eligible institutions are codified in a document entitled: “Guidelines For Change Of Operating Licence For Banks, Other Financial Institutions in Nigeria”.
According to the Director of Financial Policy and Regulation department of CBN, Chibuzor Efobi, the guideline will standardise the requirements for change of operating licence for banks and OFIs in Nigeria.
It listed Commercial Banks, Merchant Banks, Non-Interest Banks (Islamic banks), Microfinance Banks, Primary Mortgage Banks, and Payment Service Banks, as eligible financial institutions.
Prohibitions
But the CBN said converting institutions must have operated in Nigeria for five years.
Efobi also said that the apex bank prohibited banks and OFIs applying for “conversion or re-categorisation from expanding or reducing its current banking network”.
They are also prohibited from rolling out new products; carrying out any strategic banking activity and taking any decision after the conversion process has commenced.
If they must do these, it must be in line with the bank’s conversion strategy submitted to the CBN and engage in any banking activity specific to the proposed new licence.
Conditions For Converting
The apex bank, however, gave specific conditions for converting to Islamic Banking and Primary Mortgage Banks.
Commercial banks or OFIs that intend to convert to non-interest (Islamic) banking business shall constitute its Advisory Committee of Experts (ACE) upon the grant of an Approval-In-Principle and the ACE shall commence operations before the grant of final approval.
The CBN said they must provide: “Shariah Review Report and ACE’s Certificate confirming that the whole conversion process has been undertaken in conformity with Islamic commercial Jurisprudence.
“There shall be a meeting among the ACE, Shariah Compliance and Audit Unit of the converting institution with the CBN Financial Regulation Advisory Council of Experts (FRACE) to clarify any issue, where necessary.
“A bank or OFI converting to a non-interest bank shall have a plan for migration or off-boarding of their customers within twelve (12) months.
“A bank or OFI converting to a non-interest bank shall align its IT infrastructure with the new business model”.
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According to the regulator, banks or OFI converting to Islamic banks shall divest from all their non-permissible activities within a maximum period of 12 months.
The apex bank noted that any non-permissible proceeds shall be treated in line with the extant CBN Guideline on Disposal of Non-Permissible Income.
Carry The NIFIs Symbol
The CBN added that “revenue not yet received that are of doubtful permissibility are not subject to compulsory disposal, whether they were earned before or during the financial period in which the NIFI decides to convert.
“Institutions converting to the non-interest bank shall be required to carry the NIFIs symbol.
“Undertaking by the directors that the bank will always adhere to the principles underpinning the operations of the proposed new licence type”.
Furthermore, for Primary Mortgage Banks wishing to convert, are required to provide evidence of divestment from mortgage loans under the National Housing Fund.
This is a condition for the issuance of final approval.
