CBN: Banks seeking licence conversion prohibited from rolling out new services

The Central Bank of Nigeria (CBN) has released an exposure draft of the guidelines for change of operating licence for banks and other financial institutions (OFIs).

This is contained in a circular released on Tuesday and signed by Chibuzo Efobi, director of CBN’s financial policy and regulation department.

An exposure draft is a document published by regulators of financial institution like the CBN, to solicit public comments on proposed regulations.

The CBN said the draft guidelines are aimed at providing clarity on the requirements of change of the various licence types for banks and OFIs.

“The Banks and Other Financial Institutions Act 2020 (BOFIA), by virtue of section 5, empowers the Central Bank of Nigeria (CBN), to amongst others, vary the requirements of various licencing regimes,” the circular reads.

“Consequently, due to increasing requests from financial institutions to either upgrade or convert to other licence regimes, this draft guidelines aims to provide clarity to eligible financial institutions on regulatory requirements.

“This exposure draft guidelines can be accessed on our website www.cbn.gov.ng and comments/input should be addressed to the Director, Financial Policy and Regulation Department with soft copies to [email protected] within three (3) weeks from the date of this circular.”

According to the guidelines, any eligible bank or OFI applying for conversion or recategorisation are prohibited from expanding or reducing its current banking network, pending when the application is determined.

The apex bank also said such financial institutions must not roll out new products and services, carry out any new strategic banking activity, take any business decision after the conversion process has commenced except in line with the bank’s conversion strategy submitted to the CBN.

They are also not allowed to engage in any banking activity specific to the proposed new licence.

Specifying the eligibility criteria for change of operating licence, the CBN said the financial institution must be under the supervisory purview of the CBN; have no adverse supervisory report to its application; and satisfy any other condition which the it may stipulate from time to time.

However, for conversion, the CBN said the institution must have been in operation for at least five years.

“All banks or OFIs are permitted to change their licence type but the CBN reserves the right to decline a request,” the apex bank said.

The CBN said the licensing process would be in two phases: approval-in-principle and final
approval.

The apex bank said an institution is required to pay a non-refundable application fee as stipulated in the relevant guidelines of the new licence type,  a detailed business plan, information on new investors, among others.

As a requirement for the grant of a final approval, the CBN said it would 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.