CBN Sets Guidelines for Banking Operations in Free Trade Zones in Nigeria

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Wednesday, February 11, 2015 5.50PM/CBN

In exercise of the powers conferred on it by sections 2(d) and 47 of the Central Bank of Nigeria Act, No. 7, 2007 (“the Act”) and all other powers enabling it in that behalf, the Central Bank of Nigeria (“CBN”) issues the following Guidelines

 

1. Objectives

The objectives of these Guidelines are to –

 

a. complement and enhance the provisions of the Free trade zones (FTZs) Acts;

 

b. provide details of regulatory and supervisory requirements necessary to promote efficient and sustainable banking services in Nigeria‟s FTZs;

 

c. spell out details of permissible and prohibited activities of banks in Nigeria‟s FTZs;

 

d. provide details of incentives available to banks in Nigeria‟s FTZs.

 

 

2. Banks Operating In Nigeria’s Free trade zones

(1) Banks and other financial institutions in Nigeria are licensed under the Banks and Other Financial Institutions Act (BOFIA), Cap B3, Laws of the Federation of Nigeria, 2004 (as amended), complemented by the directives and guidelines issued from time to time by the Central Bank of Nigeria (hereinafter referred to as “CBN”) to carry on banking business in accordance with the provisions of the Act.

 

(2) As from the commencement of these Guidelines, only banks or financial holding companies licensed under BOFIA, or licensed foreign banks shall qualify to apply to the Authority for approval to establish presence to carry on banking business in Nigeria‟s FTZs.

 

(3) The provisions of Nigerian Export Processing Zone Authority (NEPZA) Act, Oil and Gas Free Trade Zone Act, BOFIA, CBN Act, and NDIC Act and all guidelines and regulations issued pursuant to these Acts shall apply to banks operating in the FTZs.

 

3. Application to Establish A Bank In A Free Trade Zone

(1) Without prejudice to the powers of NEPZA to grant Licenses, no enterprise shall carry on banking business in any FTZ in Nigeria without a prior approval granted to the parent bank and banking license granted to the subsidiary by the CBN.

 

(2) An application to establish a bank in a FTZ shall be submitted by the parent bank to the Authority along with the relevant fees.

 

(3) The application shall be forwarded to the CBN by the Authority with the following documents –

 

a) An application letter;

 

b) Evidence of payment to the CBN of a non-refundable application fee of USD 10,000 or such other amount as the CBN may prescribe from time to time.

 

c) Evidence of deposit of the prescribed minimum paid-up share capital with the CBN.

 

d) Board Resolution detailing the strategic objectives for the establishment of the subsidiary;

 

e) A copy of the Authority‟s acknowledgment of a formal request by the parent bank for consent to establish the subsidiary;

 

f) Initial assessment report by the parent bank detailing specific benefits derivable from the subsidiary;

 

g) Board approval for capital allocation to meet the minimum capital requirement for the subsidiary;

 

h) Feasibility report which shall include –

 

i. justification of the request including the business model and strategy for the establishment of the proposed subsidiary,

 

ii. the capacity of the bank to cope with such expansion considering its capital adequacy, liquidity, management effectiveness and availability of free funds,

 

iii. viability of the proposed subsidiary,

 

iv. details of the shareholding structure of the proposed subsidiary,

 

v. range of products or services to be offered by the proposed subsidiary ,

 

vi. a breakdown of the estimated initial capital expenditure and other operational costs for the proposed subsidiary, and

 

vii. the sources of foreign exchange to finance the establishment and running of the subsidiary.

 

i) Financial projections of the parent bank for at least 3 years, including Statement of Financial Position, Income Statement , Notes to the accounts and Assumptions;

 

j) Memorandum and Articles of Association of the proposed subsidiary;

 

k) Organogram and detailed profile of the directors and key management staff of the proposed subsidiary;

l) Human Resource requirements ;

 

m) Detailed Enterprise Risk Management Framework of the proposed subsidiary,

 

n) Details of how the operations of the subsidiary would be monitored.

 

(4) Any amendment to the Memorandum and Articles of Association of the parent bank shall be communicated to the CBN within two weeks.

 

(5) The CBN in reviewing the application and supporting documents may request for additional information, documents, and reports, as it may consider necessary.

 

(6) Where the application for a license is unsuccessful, the CBN shall release the capital deposit plus accrued interest within thirty (30) days on receipt of a formal request by the promoters.

 

(7) Where the CBN considers the application satisfactory, it shall grant an approval-in-principle (AIP) not later than three (3) months from the date of the receipt of complete information/documents.

 

(8) In the event that the CBN considers the application unsatisfactory, it shall issue the applicant a deficiency letter, stating the inadequacies identified in the application within the stated time.

 

(9) Any bank, which has been granted an AIP, shall ensure that from the date of such AIP, it shall conduct its affairs in accordance with the terms and conditions of the AIP and the requirements of the Authority.

 

(10) Any bank that has been granted an AIP shall apply to the CBN for a final license within six (6) months of the grant of an AIP.

 

(11) The AIP shall lapse after six (6) months if not utilized.

 

(12) Where the CBN considers the application satisfactory, it shall grant a final license not later than three (3) months from the receipt of complete information/documentation upon the payment of a license fee of $20,000 or such amount as the CBN may prescribe.

 

(13) For the avoidance of doubt, any license issued under these Guidelines shall be valid only for the FTZ in respect of which it is issued.

 

4. Prudential Requirements

(1) The required minimum paid-up capital to operate in a FTZ of Nigeria shall be US$10 million or such other amount as the CBN may from time to time prescribe.

 

(2) In addition, a bank in the FTZ shall meet all the prudential requirements as may be specified from time to time by the CBN

 

(3) Banks in FTZs shall appoint fit and proper persons to key management positions, as prescribed by the CBN.

 

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