Regulatory Alerts2010-07-22 | BSD/DIR/MBG/2010/01CBN Scope,Conditions and Minimum Standards for Merchant Banks Regulations
The Central Bank of Nigeria (CBN) has issued the "Scope, Conditions & Minimum Standards for Merchant Banks Regulations 2010." These regulations set forth the scope and business activities permitted for merchant banks in Nigeria. They also outline specific minimum standards that all merchant banks must meet, including capital adequacy, liquidity requirements, corporate governance standards, risk management guidelines, and internal control systems. Additionally, the CBN has specified a requirement for reporting on the implementation and effectiveness of these internal controls to the CBN within four months after the end of each financial year. The Merchant Bank must also maintain its books and financial statements in accordance with International Financial Reporting Standards (IFRS). Furthermore, these regulations include the establishment of a uniform regulatory regime for merchant banks, investment banks, discount houses, finance companies, and other financial institutions engaged in banking business in Nigeria. It is also important to note that all terms used in these Regulations shall have the same meanings as they are defined by BOFIA unless otherwise specified. These standards have been prescribed to ensure prudent management of financial institutions while maintaining transparency and efficiency within the Nigerian financial system. The "Scope, Conditions & Minimum Standards for Merchant Banks Regulations 2010" also define the activities that are prohibited from being undertaken by any merchant bank in Nigeria. For instance, no merchant bank is allowed to accept any deposit withdrawable by cheques, grant retail loans or engage in any form of retail banking, provide insurance underwriting services, among other activities. These restrictions aim to ensure that merchant banks focus on their core business activities and adhere to the specified standards and guidelines issued by the CBN from time to time. In summary, these Regulations have been established by the CBN to regulate the operations of merchant banks in Nigeria, setting out their scope, permitted business activities, prohibited activities, and minimum standards that must be met. The purpose of these regulations is to promote the stability, efficiency, and transparency of Nigeria's financial system while protecting the interests of depositors and investors.