CAPÍTULO 1: MARCO TEORICO
1.2. Análisis de las necesidades de formación
1.2.1. Análisis organizacional
1.2.1.2. La educación como realidad y su proyección
There is no doubt that with the enactment of the Money Laundering Act 2004 the Nigerian Government has taken a bold step in its efforts to fight against money laundering in the country.
However, it is effort and resourcefulness may not bear the required results if the well-known problems of enforcement of law in the country are not adequately addressed in the provisions.
It is a common feature in Nigeria that individuals and institutions prefer to subvert laid down rules rather than comply with them, for example the recent banks audit conducted by the new Central Bank Governor, it shows how reckless the banks are operating, given out a loan of N490 Billion without a collateral, which form part of analysis in given out to loan to any customer by a bank and is used to settle out the debt in case the loan goes bad, but they ignore that and give out the money without following the laid down rules. The assurance being that even when they fail to comply, officials from the regulatory institutions will always compromise their positions. This brings to the fore the popularity of corruption in the country as such officers are often ‘settled’ to overlook noncompliance with statutory provisions (Okogbule, 2007).
In such situation, there is usually an unethical alliance between regulatory officers on the hand and the defaulting financial institutions. Therefore, there will be inadequate or ineffective enforcement of the rules, to the detriment of the country.
However, recently an upright officer (Barrister Abubakar Abba Umar) with the Corporate Affairs Commission (CAC) in Nigeria lost his life in the course of his duty. He was involved in making the organisation a very good place that it supposed to be, because to get a company registered in Nigeria, it might take you two to three months, but with his coming within a day after full verification you can get your company registered. While in course of investigation of certificate fraud in the organisation, he was forced to hand over some lawyers involved to EFCC for prosecution (see Leadership newspaper, 2009), seeing all this thing happening nobody will like to give himself up in order to do a good job in fighting money laundering in Nigeria.
According to Andrew (2004, pp 173), he argues that the Act “is faithfully implemented by Economic and Financial Crimes Commission, the Central Bank of Nigeria, the National Drug
Law Enforcement Agency and the Minister of Commerce", these relevant authorities are the ones in positions to see the implementation of the Act to the letter. However, if they did not enforce the implementation concurrently, there is every chance that the Act, will not be effective as it supposed to be in checkmating the money laundering activities in the country.
There is also problem of regular monitoring of the activities of these financial institutions.
Inspectorate and Compliance Officers are known to be lax in their monitoring of the operations of these institutions, due to the fact that they are conniving to subvert the law regulating the institutions (see Okogbule, 2007).
The bankers are not reporting illegal transaction to the relevant authorities even if they knew where or how the money came about; all they are after is to have a customer with a large amount to deposit with their bank due to stiff competition in the banking sector of the country. According to Andrew (2004), some “banks might count themselves lucky to have large volume of illicit funds deposit with them" (Andrew, 2004, pp 179) and such banks collude with the money launderers in order to keep the money safe and will even keep it away the regulatory agency, which they are directed to report to on such illegal activities, for example the sum of N7.5 Billion, was found in one account of the former Inspector General of Police in a bank. The banks really don’t report any illegal activities within their businesses, but recently the Central Bank of Nigeria issued a circular directing all the banks to appoint a reporting officer who will be reporting any irregular activity within the banks (see Dailytrust Newspaper).
One of the effective regulations is the provision of Section 12, which empowers the commission to tap any telephone line or place it under surveillance, obtain access to computer system, place any bank account under surveillance or obtain communication of any authentic instrument or private contract together with bank, financial and commercial records. All these can be used if the person is suspected to use account, telephone, computer to perpetrate his/her crimes (Andrew, 2004).
4.0 CONCLUSION
Without a legal and regulatory framework there cannot be any regulation. So what we have detailed here is a set of answers to questions posed on each regulatory framework designed as a result of the CBN, NDIC and BOFI Acts.
5.0 SUMMARY
In this unit, efforts were made to discuss the legal framework for banking regulation; regulatory authorities for banking; procedures for issuance of bank licence; forms or types of banks available; organisation of banks and incidental corporate governance; role of liquidity and capital adequacy in financial institutions; and consolidated supervision of banks and other related matters.
In this next unit, we shall examine the regulatory authorities and agencies, their roles, powers, functions and responsibilities.
6.0 TUTOR-MARKED ASSIGNMENT (TMA)
1. What is the legal framework for regulation of the banking industry?
2. Who are the regulatory authorities or agencies of the banking industry?
3. List and discuss the types of banks and their role in the economy.
4. What are the procedures for obtaining a bank licence?
5. What is the organisation and corporate governance for banks?
6. How do you assess the capital adequacy and requirement of a bank?
Suggested answers
The primary legislation for the regulation of banks in Nigeria is the Banks and Other Financial Institutions Act (BOFIA), which with the Central Bank of Nigeria (Establishment) Act 2007 (CBN Act) gives the CBN the powers to supervise and regulate banks and other financial institutions in Nigeria (Aluko and Oyebode, 2017). Other relevant legislations include:
Companies and Allied Matters Act (Cap 59, Laws of the Federal Republic of Nigeria, 1990 {CAMA}), which regulates companies generally.
Nigeria Deposit Insurance Corporation Act (NDIC), which is responsible for insuring all deposit liabilities of licensed banks.
Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, which established the Autonomous Foreign Exchange Market and provides the regulatory framework for foreign exchange market in Nigeria.
The lead bank regulatory is the Central Bank of Nigeria (CBN) which was established by the Central Bank of Nigeria (Establishment) Act 2007.
The principal objectives of CBN Act are to (Section 2, CBN Act):
Ensure monetary and price stability.
Issue legal tender currency.
Maintain external reserve to safeguard international value of the currency.
Promote a sound financial system.
Act as banker and provide economic advice to the Federal Government.
Under the Banks and Other Financial Institutions Act (BOFIA), the CBN is responsible for granting banking licenses to carry on the business of banking and for supervising and regulating banks and other financial institutions in Nigeria.
The CBN is also responsible for the monitoring and regulation of the Autonomous Foreign Exchange Market and has the power to issue guidelines Foreign Exchange (Monitoring and Miscellaneous Provisions) Act. The CBN regularly issues circulars and guidelines in line with its oversight responsibilities over banks and other financial institutions the foreign exchange market in Nigeria. The CBN also has powers to intervene when as a result of its various examinations and supervisory powers it considers that a bank is failing by directing that the management and control of the bank be turned over to the Nigeria Deposit Insurance Corporation (NDIC).
Other Authorities
The Monetary Policy Committee (MPC) – was established pursuant to section 12 of the CBN Act.
The role of the MPC is to facilitate price stability and to support the economic policy of the Federal Government. It is also responsible for formulating monitoring and credit policy for the Nigerian financial system.
The Nigeria Deposit Insurance Corporation (NDIC) – the NDIC is responsible for insuring all deposit liabilities for all licensed banks and other deposit taking financial institutions operating in Nigeria and assisting monetary authorities in formulating and implementing banking policy to ensure sound banking practice and fair competition among financial institutions.
Others
The Corporate Affairs Commission (CAC) –Under the Companies and Allied Matters Act, the CAC has regulatory powers over all registered companies in Nigeria including banks and other financial institutions particularly in respect of certain statutory filings required by them.
The Financial Reporting Council of Nigeria (FRCN) – the FRCN was established under the Financial Reporting Council of Nigeria Act and has the power to enforce compliance with accounting, auditing, corporate governance and financial reporting standards.
Financial Services Regulations Coordinating Committee (FSRCC) – the Committee was established by the CBN Act to coordinate the supervision of financial institutions and to articulate the strategies for the promotion of safe, sound and efficient practices by financial intermediaries.
The members of the Financial Services Regulations Coordinating Committee are:
1. The Governor of CBN who chairs the Committee;
2. The Managing Director of NDIC;
3. The Director-General of Securities and Exchange Commission (SEC);
4. The Commissioner for Insurance;
5. The Registrar-General of the Corporate Affairs Commission (CAC);
6. A representative of the Federal Ministry of Finance not below the rank of a Director.
Auditors
The role of auditors (internal and external) include financial checks, operational accounting, evaluation and review of the system of internal control of the banks to ensure they are in line with applicable standards set by the CBN and other regulatory authorities.
Types/Forms of Bank They are:
State-owned banks
The Central Bank of Nigeria (CBN) generally regulates all banks in Nigeria, and regularly issues guidelines, circulars and directives regulating each of the different types of bank.
The only State-owned banks are the Developmental or Specialised financial Institutions, which include:
- Bank of Industry
- Federal Mortgage Bank of Nigeria - Bank of Agriculture
- The Nigeria Export Import Bank - The Infrastructure Bank
- The National Economic Reconstruction Fund
The CBN issued the Regulatory and Supervisory Guidelines for the Development Finance Institutions in Nigeria in February, 2015 to regulate Development Finance Institutions.
Universal banks, commercial and retail banks
Under a Circular dated 4 October 2010, (on the Regulation on the Scope of Banking Activities and Ancillary Matters), the CBN repealed the Universal Banking Guidelines which had introduced a regulatory framework, whereby a licensed bank in Nigeria, could carry out all categories or types of banking activities. Pursuant to this circular, the CBN made it mandatory
that the different types of banking activities needed to be done under different legal structures, thus a single legal entity could not carry out investment banking, merchant banking and commercial banking activities.
The only banks permitted to carry on business in Nigeria under the Circular are commercial banks, merchant banks and specialised banks which include non-interest banks, micro finance banks, development banks and mortgage banks.
The CBN also released the Prudential Guidelines for Deposit Money Banks in Nigeria, 2010 to regulate commercial banking activities in Nigeria.
Investment banks
The CBN Prudential Guidelines for Deposit Money Banks in Nigeria, 2010 also regulates investment and merchant banks in Nigeria. The Securities and Exchange Commission also has oversight and regulatory purview over investment banks in Nigeria, to the extent that it relates to their capital market activities.
Other banks
Other types of banks include:
Micro-finance banks: regulated by the CBN pursuant to its Revised Regulatory and Supervisory Guidelines for Micro-finance Banks.
Non-interest banks: regulated pursuant to the Guidelines for the Regulation and Supervision of Institutes Offering Non-Interest Financial Services in Nigeria.
Primary mortgage banks: regulated pursuant to the Revised Guidelines for Primary Mortgage Banks in Nigeria.
The process for applying for banking license is in two phases, namely:
Applying for the grant of approval in principle; and
Applying for the grant of a final banking license.
Grant of approval in principle: An approval for banking license should be addressed to the Director of Banking Supervision Department at the Central Bank of Nigeria (CBN) and submitted with the following:
- Non-refundable application fee of NGN500,000.00;
- Deposit of the applicable minimum share capital with the CBN, with evidence of deposit by each shareholder;
- Feasibility report of the proposed bank including the ownership structure of the proposed investors and percentage of their proposed shareholding, the objectives of the proposed banks, services to be rendered, the branch expansion programme and a five-year financial projection;
- List of shareholders, proposed directors and principal officers of the proposed bank and their particulars;
- Shareholders agreement (where applicable);
- Any other document/information that may be demanded by the authority.
Grant of final license: Not later than six months after the grant of approval in principle, the promoters of a proposed bank must submit application for the grant of final banking license addressed to the Director of Banking Supervision Department at the Central Bank of Nigeria (CBN) and submitted with the following:
- Non-refundable fee of NGN5,000,000.00 in bank draft payable to CBN;
- Three copies each of:
o Certified copy of the certificate of incorporation of the bank;
o Certified copy of the memorandum of association;
o Certified copy of Form CO2 (allotment of shares) and CO7 (particulars of directors)
- Evidence of location of head office of branch building (rented or owned) for the take-off of the banking business;
- Changes, if any, of the board, management and shareholding must be clearly stated for necessary appraisal;
- Evidence of strong room, loading bay, and banking hall facilities;
- Bullion lorries with necessary security equipment;
- Evidence of IT facilities/computerisation;
- Copies of offers of letters and acceptance of employment in respect of the management team.
Requirements
Minimum paid-up capital requirement, the minimum paid-up capital requirements for the different categories of banks are as follows:
- Regional commercial banking license: NGN10 billion or other prescribed amount.
- National commercial banking license: NGN25 billion or other prescribed amount.
- International commercial banking license: NGN50 billion or other prescribed amount.
- Merchant banking license: NGN15 billion or other prescribed amount.
For an applicant meeting all the requirements, the Governor of the CBN may issue the license with or without conditions, or refuse to issue a license, and does not need to give any reason for his refusal. An applicant must submit all documents for both stages of approval as prescribed above.
Foreign Applicants
A foreign applicant must incorporate a company in Nigeria, apply for a business permit, register with the Nigerian Investment Promotion Commission (NIPC) and obtain a banking license.
On December 10, 2013, the Central Bank of Nigeria (CBN) issued guidance notes for the implementation of Basel II/III in Nigeria (Guidance notes on Regulatory Capital Measurement and Management for the Nigerian Banking System {Basel Guidance Notes}).
The Basel Guidance Notes sets out basic approaches to be adopted by banks for the computation of credit risk, market risk and operational risk.
The Framework for the Regulation and Supervision of Domestic Systematically Important Banks in Nigeria was also issued in the light of the Basel Committee on Banking Supervision (BCBS) and the Financial Stability Board (FSB) developing a framework for Domestic Systematically Important Banks (D-SIBs) and Global Systematically Important Financial Institutions (G-SIFIs).
The implementation of the Basel II/III standards by the CBN in Nigeria is an ongoing process and a target date for full implementation of the Basel III standards is yet to be set.
The Central Bank of Nigeria (CBN) is responsible for prescribing the minimum liquidity ratio for banks in Nigeria from time to time in line with its monetary policy’s directions. SIFIs must comply with the minimum liquidity ratio requirement for banks.
7.0 REFERENCES/FURTHER READINGS
Dosekun, K., Senbore, O. and Oyebode, A. (2017). Banking regulation in Nigeria: overview, updated on April 1. Downloaded from the internet in September, 2017.
Exchange Control (Anti Sabotage) Decree No 7 of 1984
National Drug Law Enforcement Agency Decree No 48 of 1989, now Caps No 29 Laws of the federation of Nigeria, 2004; Okogbule, 2007).
UNIT 2 REGULATORY AGENCIES I – CENTRAL BANK OF NIGERIA