14 February 2011

Nigeria: Banks Under Pressure on Structure

Lagos — Nigeria's banks are under pressure to submit their new banking structure in order to meet the Central Bank of Nigeria's (CBN) deadline on the new banking model.

Investigation by LEADERSHIP showed that some banks that have not submitted their preferred structure are running helter skelter to beat the 90 days deadline which will expire by tomorrow .

The banks current rush was based on the CBN mandate that compliance plan must be approved by the respective bank boards.

The apex bank had earlier directed that the outcome of the new banking structure must be fair to both the shareholders and depositors and must be an acceptable plan.

The CBN's guidelines stipulated that the banks have 90 days from November 15, 2010, to submit a board-approved compliance plan for its consideration and approval and have up to May 2012 to divest from all non-banking subsidiaries in line with the new regulation while banks that are unwilling to divest from their non-banking subsidiaries are required to form a Holding Company which will have a separate board, own the bank and its subsidiaries as separate and independent entities and report directly to the board of the Holding Company.

The new structure, according to the CBN, must indicate the type of banking licence desired and business justification for the approach intended to be adopted to comply with the regulation.

The plan, which CBN insisted must be fair to shareholders and depositors, would earn a bank an approval in principle (AIP) where CBN considered it satisfactory, after which the bank will begin the process of restructuring to achieve the desired status.

Already, over 7 banks have announced their option on whether to divest from all non-banking subsidiaries or to form a Holding Company in compliance to the CBN directive.

For instance, First Bank of Nigeria Plc and United Bank for Africa (UBA) Plc have announced their intention to adopt a Holding Company structure to manage the bank and its subsidiaries while GTBank and Diamond Bank have announced their intention to collapse their mortgage subsidiaries into their respective commercial banks while putting up the other subsidiaries for sale.

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