LAGOS—Banks planning to set up or already operating subsidiary units in any of Nigeria’s Free Trade Zones, FTZs, must now have a minimum capital base of $10 million, the Central Bank of Nigeria, CBN, approved guideline for setting up a bank in a free trade zone in Nigeria has said.
It said banks currently operating in the FTZ before the issuance of these guidelines shall, from the commencement of these guidelines, regularize and comply with the provisions for establishing presence in the FTZ. This should be done within six months of the issuance of the guidelines.
The guideline states: “The required minimum paid-up capital to operate in a FTZ of Nigeria shall be $10 million or such other amount as the CBN may from time to time prescribe. In addition, a bank in the FTZ shall meet all ‘the prudential’ requirements as may be specified from time to time by the CBN.”
According to the approved guideline, “banks in FTZs shall appoint fit and proper persons to key management positions, as prescribed by the CBN. It said that a bank in the FTZs shall disclose to the CBN, the equity interests of its directors and key officers in any enterprise in the zones within fourteen days of acquisition of such interest.
“It shall be the duty of a director of a bank in a FTZ who is in anyway, interested in the grant of an advance, loan or credit facility with the bank in the FTZ to declare the nature of his interest to a meeting of the Board of Directors of the bank.
“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.
“Without prejudice to the powers of NEPZA to grant licences, no enterprise shall carry on banking business in any FTZ in Nigeria without: a prior approval granted to the parent bank by the authority, after meeting the requirements to establish the subsidiary in the FTZ and; a banking licence granted to the subsidiary by the CBN, after meeting the requirements to carry on banking business.”
Further it said that “An application to establish a bank in a FZ shall be submitted by the parent bank to the Authority along with the relevant fees. The application shall be forwarded to the CBN by the Authority with the following documents -An application letter; Evidence of payment to the CBN of a non-refundable application fee of $10,000 or such other amount as the CBN may prescribe from time to time.
“Other requirements include evidence of deposit of the prescribed minimum paid-up share capital with the CBN. Board Resolution detailing the strategic objectives for the establishment of the subsidiary; A copy of the Authority’s acknowledgment of a formal request by the parent bank for consent to establish the subsidiary; Initial assessment report by the parent bank detailing specific benefits derivable from the subsidiary; Board approval for capital allocation to meet the minimum capital requirement for the subsidiary; Feasibility report which shall include -justification of the request including the business model and strategy for the establishment of the proposed subsidiary; the capacity of the bank to cope with such expansion considering its capital adequacy, liquidity, management effectiveness and availability of free funds; viability of the proposed subsidiary; details of the shareholding structure of the proposed subsidiary; range of products or services to be offered by the proposed subsidiary ; a breakdown of the estimated initial capital expenditure and other operational costs for the proposed subsidiary, and the sources of foreign exchange to finance the establishment and running It further said that applicants for a subsidiary in the Free Trade Zones will require Financial projections of the subsidiary bank for at least three years, including Statement of Financial Position, Income Statement , Notes to the accounts and Assumptions;
Memorandum and Articles of Association of the proposed subsidiary; Organogram and detailed profile of the directors and key management staff of the proposed subsidiary; human Resource requirements; detailed Enterprise Risk Management Framework of the proposed subsidiary, details of how the operations of the subsidiary would be monitored.
Such banks will also be required to notify the apex bank of any amendment to the Memorandum and Articles of Association of the parent bank within two weeks.
The CBN said that in reviewing the application and supporting documents it may request for additional information, documents, and reports, as it may consider necessary.
According to the CBN where the application for a license is unsuccessful, the CBN shall release the capital deposit plus accrued interest within thirty on receipt of a formal request by the promoters. It further said that where the CBN considers the application satisfactory, it shall grant an approval-in-principle (AIP) not later than three months from the date of the receipt of complete information/documents. 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.
It said that 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. Any bank that has been granted an AIP shall apply to the CBN for a final license within six months of the grant of an AIP.
The AIP shall lapse after six months if not utilised. Where the CBN considers the application satisfactory, it shall grant a final license not later than three 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. It stated that any license issued under these guidelines shall be valid only for the FZ in respect of which it is issued.