Daily Independent Online.
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Monday, August 16, 2004.
A Bill to amend Banks and other Financial Institutions
Decree
The battle of wits between the Senate and the Central Bank
of Nigeria (CBN) over the latter’s directive to commercial banks to raise
their minimum capital base from N2 billion to N25 billion by the end of next
year got fiercer last Thursday as the senators threw up a bill ostensibly
seeking to make the apex bank more effective and responsive.
Close watchers sure do know that the lawmakers are not
making pretences over their desire to grab the reinsof the CBN as it has
apparently proved too strong and independent, particularly with the backing of
President Olusegun Obasanjo who has already declared that the CBN directive is
irreversible.
The bill, sponsored by the chairman and some members of the
Senate Committee on Banks, Insurance, and Financial Institutions, is as
follows:
Sponsored by Senators Ambuno Zik Sunday, Farouk Bello Bunza.
Enacted by the National Assembly of the Federal Republic of Nigeria.
The Banks and Other Financial Institutions Decree No 40
(hereinafter referred to as the Principal Act) is amended as set out in this
Act.
1.Amendment to Section 2
Amends Section 2(2) to read thus:
Any company that transacted banking business, without a
valid licence under this act is guilty of an offence and liable on conviction
to a fine of not less than N10,000,000 in addition, if any person being a
director, manager or officer of a bank who aids in transacting business without
a valid licence is guilty of an offence and liable on conviction to a fine not
less than N2,000,000
2. Amendment to Section 5
Amends section 5(3) to read thus:
Any bank which fails to comply with any of the conditions of
its licence is guilty of an offence and shall be liable on conviction to a fine
not exceeding N1,000,000 and in addition any person who being a director,
manager or officer of a bank fails to take reasonable steps to secure
compliance with any of the conditions of the licence of the bank is guilty of
an
offence and liable on conviction to a fine not exceeding N
1,000,000
3. Amendment to section 6
Amends section 6(l) to read thus:
No bank may open or close branch office, cash centre or
representative office anywhere within or outside Nigeria except with the prior
consent in writing of the Central Bank
4. Amendment to section 7
Amend section 7(l) to read thus:
Except with the prior consent of the Governor, no bank or
shareholder shall enter into an agreement or arrangement
(a) Which result in: (i) A
change in the control of the bank?,
(ii) The transfer of a
significant shareholding in the bank;
(b) For the sale, disposal or transfer howsoever of the
whole or any part of the business of the bank;
(c) For the amalgamation or merger of the bank with any
other person;
(d) For the reconstruction of the bank;
(e) To employ a management agent or to transfer its business
to any such agent.
Amend section 7(2) to read thus:
Any person who contravenes the provision of subsection(l) of
this section is guilty of an offence and liable to a fine not less than
N1,000,000 and in the case of a continuing offence to an additional fine of
N100,000 for each day during which the offence continues.
Add a new 7(3) with the following words:
For the purpose of paragraph (a) of subsection (1) of this
section, a transfer by a bank or shareholders of an aggregate of not less than
5 percent of the share capital of the banks shall be deemed to be the transfer
of a significant shareholding. Provided that the Governor shall have the power
by notice published in the gazette to vary from time to time the percentage of
the share capital of a bank which constitutes significant shareholding.
5. Amendment to section 8.
Amend section 8(4) to read thus:
Any person who contravenes the provisions of subsection (1)
or (3) of this section is guilty of an offence and liable on conviction to a
fine not exceeding N1,000,000 and in the case of a continuing offence to an
additional fine of N 100,000 for each day during which the offence continues.
6. Amendment to section 9.
Amend section 9(l) to read thus:
Banks shall be categorized according to paid up share
capital. There shall be three categories of banks as follows(a) Mega Banks with
minimum paid?up share capital of N25b b) Medium Banks with minimum paid up
share capital of N 10 billion; and (c) Small Banks with minimum paid up share
capital of N5billion.
7. Amendment to section 15
Amend section I 5(l) to read thus:
Every Bank shall maintain with the bank cash reserves,
special deposits and hold
specified liquid assets or any other securities as the case may be, not less in
amount than as may, from time to time, be prescribed by the Bank by virtue of
section 39 of the Central Bank of Nigeria Act 1991.
Amend section 15(4)(b) to read
thus:
Every bank shall not allow its holding of cash reserves;
specified liquid assets, special deposits and other securities to be less than
the amount which may, from time to time, be prescribed by the Bank.
Amend section 15(6Xc) to read
thus:
Net balance at any licensed bank (excluding uncleared
effects) and collaterised money at call in Nigeria.
Amend section 15(6)(e) to read
thus:
Interbank placement, inland bills of exchange and promissory
notes rediscountable at the bank
Amend section 15(6)(h) to read
thus:
Such other negotiable instruments as may, from time to time,
be approved by the bank for the purpose of this section.
8. Amendment to section 16
Amend section 16(3) to read thus:
Notwithstanding paragraphs (a) and (b) of subsection (1) of
this section, the bank may, from time to time, specify a different proportion
of the net profits of each year, being either lesser or greater than the
proportion specified in paragraphs (a) and (b) to be transferred to the reserve
fund of a bank for the purpose of ensuring that the amount of the reserve fund
of such bank is sufficient for the purpose of its business and adequate in
relation to its liabilities.
9. Amendment to section 18
Amend section 18(5) to read thus:
For the purpose of this section of this Decree, a general
notice given to the board of directors of a bank by a director to the effect
that he is a member of a company or firm seeking an advance, loan or credit
facility from the bank shall be regarded as a declaration of his interest in
the grant of the advance, loan or credit facility which may after the date of
the notice, be granted to that company or firm, and shall be deemed to be a
sufficient declaration of interest in relation to any such advance, loan or
credit facility so granted; Provided that any such notice shall not have effect
unless it is given at a meeting of the board of directors or the bank which
shall be required to do all things reasonably necessary to ensure that it is
brought up and read at the next meeting of the board of directors of the bank
after it is so given.
Amend section 18(7) to read thus:
For the purpose of subsection (5) of this section, a general
notice given to the board of directors of a bank by a director shall be deemed
to be a sufficient declaration of interest in relation to any advance, loan or
credit facility if-
Amend section 18(11) to read
thus:
Any director who contravenes the provisions of subsection
(3) or (8) of this section is guilty of an offence and liable on conviction to
a fine of not less
than N1,000,000 or imprisonment for a term of 3 years or to
both such fine and imprisonment.
10. Amendment to section 19
Amend section 19(l) to read thus:
No bank shall be managed by a management agent except as may
be approved by the Bank.
11. Amendment to section 20
Amend section 20(l) (a) to read
thus:
To any person any advance, loan or credit facility or give
any financial guarantee or incur any other liability on behalf of any person so
that the total value of the advance, loan, credit facility, financial guarantee
or any other liability in respect of the person is at any time more than 35
percent of the shareholders fund
unimpaired by losses of such percentage as the Bank may from time to time
determine and for the purpose of this paragraph, all advances, loans or credit
facilities extended to any person shall be aggregated and shall include all
advances, loans or credit facilities extended to any subsidiaries or associates
of a body corporate or other related party as the Bank may by regulation from
time to time prescribe.
Provided that the provisions of this paragraph shall not
apply to transactions between banks or between branches of a bank or for the
purchase of clean or documentary bills of exchange, telegraphic transfers or
documents.
Amend section 20(l)(b) to read thus:
Any loan, advance or credit facility against the security of
its own shares; Add a new 20(1)(c) with the following words:
Any loan, advance or credit facility in excess of N1,000,000
or such amount as may be prescribed by the Bank, except such loan, advance or
credit facility is secured in accordance with the bank's rules and regulations;
Amend section 20(2)(a) to read
thus:
Permit to be outstanding, unsecured advances, loans
or unsecured credit facilities, of an aggregate amount in
excess of
N1,000,000 or such amount as may be prescribed by the Bank.
Amend section 20(2)(a)(iii) to
read thus:
To any public or private company in which it or any one or
more of its
directors
jointly or severally maintains shareholding.
Amend section 20(2)(d)(ii) to
read thus:
Any shareholding approved by the Bank pursuant to
sub?paragraph (i) of this paragraph, the aggregate value of which does not at
any time exceed twenty five percent of the sum of shareholders fund unimpaired
by losses.
Amend section 20(2)(d)(iii) to
read thus:
All shareholding acquired by a bank while managing an equity
issue. Provided that the aggregate value of such acquisition does not at any
time exceed the sum of the paid-up share capital of that bank or ten percent of
its total assets, excluding contract tems, whichever is higher and that this
paragraph shall not apply to any nominee company of a bank which deals in stock and shares for or on
behalf of the bank's customers or clients or majority interest acquired by a
bank in a company while managing an equity issue.
Amend section 20(4) to read thus:
In paragraphs (a) and (b) of subsection (2) of this section,
the expressions "unsecured advance and loans" or "unsecured
credit facilities," mean advances, loans or credit facilities made without
security, or in respect of any advances, loans or credit facilities made with
security, any part thereof which at any time exceeds the market value of the
assets constituting the security, or where the bank is satisfied that there is
no established market value, the value of the assets as determined on the basis
of a valuation approved by the bank.
Amend section 20(6) to read thus:
All the directors of a bank shall be liable jointly and
severally to indemnify the bank against any loss arising from any unsecured
advances, loans or credit facilities under paragraph (a) of subsection (2) of
this section.
Amend section 20(7) to read thus:
Any director, manager or officer who fails to comply with
the requirements of this section of this Act is guilty of an offence and liable
on conviction to a fine not less than N5,000,000 or to imprisonment for a term
of 3 years and shall in addition be required to repay the loan or forfeit his
known assets in lieu of the unpaid loan.
Amend section 20(8) to read thus:
Any bank which after the commencement of this Act enters
into any transaction which is inconsistent with the provision of subsection (2)
or (3) of this section shall be liable to a fine of 50 percent of the excess
amount involved.
12. Amendment to section 21
Amend section 2 1 (1) (c) to read
thus:
The shareholding by the bank in any medium scale industry,
agricultural enterprise or venture capital company or any other business
approved by the Bank shall not be more than ten percent of the bank's
shareholders fund unimpaired by losses or such other percentage as the Bank may
from time to time prescribe.
Amend section 21 (1)(d) to read
thus:
The aggregate value of the equity participation of the bank
in all enterprises pursuant to this section does not at any time exceed thirty
five percent of its shareholders' fund unimpaired by losses or such other
percentage as the Bank may from time to time prescribe.
Amend section 21(4),to read thus:
Any bank which fails to comply with the provisions of
subsection (3) of this section is guilty of an offence and liable on conviction
to a fine of not less than N50,000 for each day during which the offence continues.
13. Amendment to section 22 Amend
section 22(l) to read thus:
A bank shall not hold for more than 6 months any equity
interest acquired in a company while managing an equity issue.
Amend section 22(2) to read thus:
Any bank which acts in contravention of this section is
guilty of an offence and liable to a fine not less than N500,000 for each day
during which the offence continues.
14. Amendment to section 23 Amend
section 23(l) to read thus:
Every bank shall display at its office its lending and
deposit interest rates and shall render to the Bank information on such rates
as may be specified, from time to time, by the Bank; Provided that the
provisions of this subsection shall not apply to profit and loss sharing banks,
but such a bank shall indicate conspicuously in all its offices that it charges
no interest.
15.Amendment to section 24 Amend
section 24(3) to read thus:
The books of account shall be kept at the principal
administrative office of a bank and at the branches of each bank in the English
language.
Amend section 24(5)(b) to read
thus:
Has by his wilful act been the cause of any default thereof
by the bank, he is guilty of an offence and liable on conviction, in respect of
paragraph (a) of this subsection,
to a fine of N 100,000 and in respect of paragraph (b) of this section, to a
fine of N500,000.
Amend section 24(6) to read thus:
Any bank in breach of any of the provisions of subsection
(1) to (4) of this section shall be guilty of an offence and liable on
conviction to a fine of not less than N500,000.
16.Amendment to section 25 Amend
section 25(l) to read thus:
Every bank shall submit to the Bank not later than 28 days
after the last day of each month or such other interval as the Bank may
specify, a statement showing:
(a) the assets and liabilities of the Bank; and (b) an analysis of advances and other
assets, at its head office and branches
in and outside Nigeria in such form as the Bank may specify, from time
to time.
17.Amendment to section 26 Amend
section 26(2) to read thus:
Notwithstanding anything in this section, the Bank may
prepare and publish consolidated statements aggregating the statements
furnished under section 25 of this Decree.
18.Amendment to section 27
Amend section 27(l) to read thus:
A bank shall, not later than 4 months after the end of its
financial year, forward to the Bank for approval its financial statement which
shall be prepared in accordance with the relevant accounting standards for
banks.
Amend section 27(2) to read thus: I
Every bank shall thereafter but not later than I month after
approval by the Bank :
(a) Cause to be published in a daily newspaper printed and
circulating in Nigeria; (b) Exhibit in a conspicuous position in each of its.
office and branches; (c) Forward to
the Bank, copies of the bank's balance sheet and profit and loss account duly
signed and containing the full and correct names of the directors of the bank.
Amend section 27(6) to read thus:
Any bank which fails to comply with any requirements of this
section is guilty of an offence and liable on conviction to a fine of not less
than N1,000,000.
•To be continued next Monday
