Regulatory Alerts2014-08-04 | OFISD/GL/09/07/2014Revised Guidelines For Finance Companies In Nigeria
The Central Bank of Nigeria (CBN) has a number of regulations in place to govern commercial banks' activities. These are designed to maintain financial stability, promote competition, and ensure sound banking practices. Some of the key regulations include: 1. Minimum capital requirement: Commercial banks must have at least N25 billion as minimum paid-up share capital. 2. Ratio of loans to deposits: Banks should not lend more than 70% of their deposits to one customer. 3. Cash reserve ratio (CRR) and statutory liquidity ratio (SLR): Commercial banks are required to maintain a minimum cash reserve ratio of 27.5% and a statutory liquidity ratio of 30%. 4. Investment in government securities: Banks must invest at least 65% of their total investments in the form of government securities. 5. Lending to directors and employees: Commercial banks are not allowed to grant loans to their directors or employees without the approval of CBN. The maximum amount that can be granted is 10% of the bank's shareholders' funds, and no loan should exceed N50 million. 6. Bank secrecy law: Banks must maintain the confidentiality of customers' financial transactions. 7. Interest rates: Commercial banks are allowed to set their interest rates within the limits prescribed by CBN. The maximum lending rate is currently at 25%, while the minimum savings deposit rate is 1%. 8. Fraud and forgery: Banks must report any cases of fraud or forgery immediately to CBN. 9. External auditors: Commercial banks are required to appoint an external auditor approved by CBN to conduct annual audits. 10. Code of conduct: Directors and employees of commercial banks are required to adhere to a code of conduct set forth by CBN. Non-compliance with these regulations can result in fines, suspension or revocation of operating licenses, removal of directors from office, among other sanctions. The aim is to ensure the stability and integrity of the banking sector while promoting healthy competition and consumer protection.