The Central Bank of Nigeria (CBN) has issued guidelines on the processes, requirements, and qualifications expected of microfinance, commercial, and primary mortgage banks seeking to re-categorize or convert their licenses.
Among other criteria, applicants are expected to meet the capitalization of their target categories and show readiness to comply with the codes of conduct.
The regulatory guide, signed by Chibuzo Efobi, Director of the Financial Policy and Regulation Department, also applies to merchant, non-interest, and payment service banks seeking a change of business line from the CBN.
Operators who have applied for license category conversion are prohibited from expanding, reducing their current banking network, launching new products, or engaging in new strategic banking activities while the application is being processed, according to the documents.
The applicants are also prohibited from taking any new business decisions 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 license, irrespective of the category, is required to show proof of IT infrastructure as a 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 due to poor IT support.
In its requirement, the bank stated: “Any bank or OFI seeking to change its license 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 extraordinary general meeting and by 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, and strategy, governance structure, evidence of Shariah compliance (where applicable), and risk management framework. Other subject matters to be covered are financial projections and CBN approvals for any change(s) in management/board/shareholding since the issuance of the existing license.
“As a requirement to the grant of final approval, the CBN shall inspect 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 license 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: an opening statement of affairs signed by external auditors and at least two directors with their names and designations, and minutes of a pre-commencement board meeting,” the bank said.