₦airaland Forum

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Central Bank of Nigeria(CBN) yesterday said universal banking will be phased out within the next 24 months saying the unbundling of the banking sector to enhance specialisation and deepening of the sector has commenced.
The apex bank further said that under the unbundling process yet to be finalized, banks will no longer be permitted to operate or venture into other financial services sector such as mortgage institutions, insurance, microfinance and other subsidiaries within a group.
He said the banks would be required to seek for approval from the CBN for licensing, and would in addition be expected to meet the regulatory conditions of the regulatory agency of the subsidiary institution intended to be open.
The CBN director of banking supervision, Mr. Samuel Oni broke the news in briefing with Journalists after the 298th meeting of the Bankers’ Committee yesterday in Abuja.
He said the model to be introduced, monitored and strictly implemented is in line with international best practice and International Financial Reporting Standards (IFRS) meant to
safe guard depositors funds from being plunged into high risk areas without adequate protection.
He said the apex bank prudential guidelines for banks which were last reviewed in 1990 would now be reviewed every five years to be abreast with current developments, assuring that before the end of this year, the current edition would be reviewed to meet the challenges of the sector.
He regretted that the current practice of universal banking which made it possible for banks to undertake operations within the group has exposed financial institutions to high operating risks, and thus the need to adequately regulate to insure safety of depositors’ funds.
He said the CBN was working with the Corporate Affairs Commission (CAC) the Securities and Exchange Commission (SEC) the Nigerian Deposit Insurance Corporation (NDIC),and the National Insurance Commission (NIC) to work out how the banks would be recapitalized to ensure that they have adequate capitals in line with the unbundling process.
Oni said the new unbundling model would entail that the apex bank groups the DMBs into either of the banking services such as international banking; regional banking, national; banking and microfinance banking.
He said: "We have decided to ensure that the quality of the banks are enhanced, given this as a background, we will come up with a model that we believe would support that kind of
stability. We are clearly reviewing the universal banking model and we are coming up with a structure that would help us make banks to do business in terms of assisting the economy.
"So on the basis of that, we have come out with a holding structure model for the financial sector and what that means is that we are advocating a structure we think will allow banks to transform all their subsidiaries into a non operating holding company in which the bank would become a subsidiary of that non operating financial holding company.
"So we are going to be looking at how to work out the details in terms of the transition arrangement from what we presently have and we are going to have sufficient time of between 18 to 24 months to transmit into that framework. We want a situation where banks will concentrate in banking activities and the way we will be doing it is that we will be issuing separate licenses to each model of banking, in order words we will discontinue with the universal banking licensing regime."
He said the apex bank will issue a license for commercial, microfinance, regional, national, international, mortgage and investment banking businesses, adding that some specialized banks will be recognised like non interest banking, agriculture banking will be recognized a separate license would be given
for this purpose.