Banks and other Financial Institutions Decree

Banks and other Financial Institutions Decree

1991

Laws of the Federation of Nigeria

Part 1

Banks

1.	Functions, powers and duties of the Central Bank of Nigeria	2	Banking business	3	Application for grant of licence
4.	Investment and release of prescribed minimum paid-up share capital	5.	Power to revoke or vary conditions of licence	6.	Opening and closing of branches.
7.	Reconstructing, re-organisation, merger and disposal, etc. of bank.	8.	Operation of foreign banks in Nigeria	9.	Minimum paid-up share capital of banks and compliance with minimum paid-up share capital requirement.
10.	Shareholder's voting right to be proportional to shareholding	11.	Restriction of legal proceedings in respect of shares held in the name of another.	12.	Revocation of licence.
13.	Minimum capital ratio. Minimum capital ratio.	14.	Non-compliance with capital ration requirement.	15.	Minimum holding of cash reserves, specified liquid assets, special deposits and stabilisation securities.

Duties of Banks

16.	Maintenance of reserve fund	17.	Restriction on dividend	18.	Disclosure of interest by directors, managers and officers.
19.	Prohibition of employment of certain persons and inter-locking directorship, etc.	20.	Restriction on certain banking activities.	21.	Acquisition of shares in small and medium-scale industries, agricultural enterprises and venture capital companies.
22.	Restriction on operations of merchant banks.	23.	Display of interest rates

Books of account

24.

Proper books of account.

25.

Returns by banks

26.

Publication of consolidated statements.

27.

Publication of annual accounts of banks

28.

Contents and forms of accounts.

29.

Appointment, power and report of approved auditor

Supervision

30.	Appointment and power of Director of Banking Supervision and other examiners.	31.	Routine examination and report thereon.	32.	Special examination.
33.	Special examination	34.	Control of failing bank	35.	Management of failing bank
36.	Power of the Bank to revoke licence or apply to the Court.	37.	Duty to notify bank or person to be affected.	38.	Application to the Federal High Court for winding-up

General and Supplemental

39.	Restrictions on the use of certain names.	40.	General restriction on advertisement for deposits.	41.	Power of the President to proscribe trade union.
42.	Closure of bank during a strike	43.	Prohibition of the receipt of commissions, etc. by staff of banks.	44.	Disqualification and exclusion of certain individuals from management of banks.
45.	Offences by companies, etc. and by servants and agents.	46.	Offences by directors and manager of banks	47.	Penalties for offence not otherwise provided for.
48.	Jurisdiction of the Federal High Court.	49.	Protection against adverse claims.	50.	Priority of local deposit liabilities.
51.	Exemptions.	52.	Exemption of community banks, etc.	53.	Application of Companies and Allied Matters Decree 1990
54.	Application of Nigeria Deposit Insurance Corporation Decree 1988.	55.	Power to make regulations.

Part II

Other Financial Institution

56.	Prohibition of unlicensed financial institutions.	57.	Application for licence	58.	Failure to comply with conditions of licences.
59.	Supervisory power of the Bank

Part III

Miscellaneous and Supplementary

60.

Failure to comply with rules, etc.

61.

Interpretation.

62.

Citation and repeal.

Banks and other Financial Institutions Decree

1991

Laws of the Federation of Nigeria

The Federal Military Government hereby decrees as follows: -

Part 1

Banks

Establishment of Banks, Etc.

1. (1) The Central Bank of Nigeria (hereafter in this Decree referred to as "the Bank") shall have all the functions and powers conferred and the duties imposed on it by this Decree.

(2) The Bank shall in addition to the functions and powers conferred on it by this Decree, have the functions and powers conferred and the duties imposed on the Bank by the Central Bank of Nigeria Decree 1991.

(3) The Bank may authorise or instruct any officer or employee of the Bank to perform any of the functions, exercise any powers, or discharge any of its duties under this Decree.

(4) The Bank may, either generally or in any particular case, appoint any person who is not an officer or employee of the Bank, to render such assistance as it may specify in the exercise of its powers, the performance of its functions, or the discharge of its duties under this Decree, or to exercise, perform or discharge the functions and duties on behalf and in the name of the Bank.

(5) For the purposes of this Decree, a person shall be deemed to be receiving money as deposits -

(a) if the person accepts deposit from the general public as a feature of its business or if it issues an advertisement or solicits for such deposit;

(b) notwithstanding that it receives moneys and deposits which are limited to fixed amounts or that certificates or other instruments are issued in respect of any such amounts providing for the repayment to the holder thereof either conditionally or unconditionally of the amount of the deposits at specified or unspecified dates or for the payment of interest or dividend on the amounts deposited at specified intervals or otherwise, or that such certificates are transferable.

(6) Notwithstanding anything contained in this section to the contrary, the receiving of moneys against any issue of shares and debentures offered to the public in accordance with any enactment in force within the Federation shall not be deemed to constitute receiving moneys as deposits for the purposes of this Decree.

2. (1) No person shall carry on any banking business in Nigeria except it is a company duly incorporated in Nigeria and holds a valid banking licence issued under this Decree.

(2) Any person who transacts banking business without a valid licence under this Decree is guilty of an offence and liable on conviction to a term of imprisonment not exceeding 10 years or a fine exceeding N500,000 or to both such imprisonment and fine.

3. (1) Any person desiring to undertake banking business in Nigeria shall apply in writing to the Governor for the grant of a licence and shall accompany the application with the following-

(a) feasibility report of the proposed bank;

(b) a draft copy of the memorandum and articles of association of the proposed bank;

(d) the prescribed application fee; and

(e) such other information, documents and reports as the Bank may, from time to time, specify.

(2) After the applicant has provided all such information, documents and report as the Bank may require under subsection (1) of this section, the shareholders of the proposed bank shall deposit with the Bank a sum equal to the minimum paid-up share capital that may be applicable under section 9 of this Decree.

(3) Upon the payment of the sum referred to in subsection (2) of this section, the Governor may issue a licence with or without conditions or refuse to issue a licence and the Governor need not give any reasons for the refusal.

(4) Where an application for a licence is granted, the Bank shall give written notice of that fact to the applicant and the licence fee shall be paid.

4. The Bank may invest any amount deposited with it pursuant to section 3(2) of this Decree in treasury bills or such other securities until such a time as the Governor shall decide whether or not to grant a licence, and where the licence is not granted the Bank shall repay the sum deposited to the applicant, together with the investment income after deducting administrative expenses and tax on the income.

5. (1) Except as provided in section 9(2) of this Decree, the Governor may vary or revoke any condition subject to which a licence was granted or may impose fresh or additional conditions to the grant of a licence.

(2) Where the grant of a licence is subject to conditions, the bank shall comply with those conditions to the satisfaction of the Bank within such period as the Bank may deem appropriate in the circumstances.

(3) Any bank which fails to comply with any of the conditions of its licence is guilty of an offence under this section and shall be liable on conviction to a fine not exceeding N1,000 for each day during which the condition is not complied with.

(4) Where the Governor proposes to vary, revoke or impose fresh or additional conditions on a licence, he shall, before exercising such power, give notice of his intention to the bank concerned and give the bank an opportunity to make a representation to him thereon.

(5) Any bank which fails to comply with any fresh or additional condition imposed in relation to its licence is guilty of an offence and liable on conviction to a fine of N100,000 and where the offence continues, to an additional fine of N1,000 for each day during which the offence continues.

6. No bank may open or close any branch office anywhere within or outside Nigeria except with the prior consenting writing of the Bank.

7. Except with the prior consent of the Governor, no bank shall enter into an agreement or arrangement-

(a) which results in a change in the control of the bank;

(b) for the sale, disposal or transfer howsoever of the whole or any part of the business of the bank;

(d) for the reconstruction of the bank;

(e) to employ a management agent or to transfer its business to any such agent.

8. (1) Except with the approval of the Bank, no foreign bank shall operate a representative office in Nigeria.

(2) Any person who contravenes subsection (1) of this section or section 7 of this Decree is guilty of an offences and liable on conviction to a fine of N100,000 and in the case of a continuing offence to an additional fine of N10,000 for each day during which the offence continues.

9. (1) The President on the recommendation of the Bank shall, from time to time, determine, as he may deem appropriate, the minimum paid-up share capital of each category of banks.

(2) Subject to subsection (1) of this section, the minimum paid-up share capital of a bank shall in respect of-

(a) a commercial bank, be N50,000,000;

(b) a profit and loss sharing bank, be N50,000,000;

(d) a community bank, be N250,000.

(3) Any failure to comply with the provisions of this section within 12 months from the date of this Decree shall be a ground for the revocation of any licence issued pursuant to the provisions of this Decree or any other Act repealed by it.

10. Notwithstanding the provisions of the Companies and Allied Matters Decree 1990 or any agreement or contract, the voting rights of every shareholder in a bank shall be proportional to his contribution to the paid-up share capital of the bank.

11. Notwithstanding anything contained in any law or in any contract or instrument, no suit or other proceeding shall be maintained against any person registered as the holder of a share in a bank on the ground that the title to the said share vests in any person other than the registered holder:

Provided that nothing in this section shall bar a suit or other proceeding on behalf of a minor or person suffering from any mental illness on the ground that the registered holder holds the share on behalf of the minor or person suffering from the mental illness.

12. The Governor may, with the approval of the President by notice published in the Gazette, revoke any licence granted under this Decree if a bank-

(a) ceases to carry on in Nigeria the type of banking business for which the licence was issued for any continuous period of 6 months or for any period aggregating 6 months during a continuous period of 12 months;

(b) goes into liquidation or is wound up or otherwise dissolved;

(d) has insufficient assets to meet its liabilities;

(e) fails to comply with any obligation imposed upon it by or under this Decree or the Central Bank of Nigeria Decree 1991.

13. (1) A bank shall maintain; at all times, capital funds unimpaired by losses, in such ratio to all or any assets or to all or any liabilities or to both such assets and liabilities of the bank and all its offices in and outside Nigeria as may be specified by the Bank.

(2) Any bank which fails to observe any such specified ratios may be prohibited by the Bank from-

(a) advertising for or accepting new deposits;

(b) granting credit and making investment;

(3) In addition, the bank may be required to draw up within a specified time a capital reconstitution plan acceptable to the Bank.

14. (1) Failure to comply with the provisions of section 13 of this Decree may constitute a ground for the revocation of the licence of the bank under this Decree.

(2) Where the Bank proposes to recommend to the President, the revocation of the licence of any bank pursuant to subsection (1) of this section, the Bank shall give notice of its intention to the bank and the bank may within 30 days make representation (if any) in respect thereof.

(3) Any bank dissatisfied with the decision of the Bank to recommend the revocation of its licence under this section may, within 14 days of the decision being communicated to it, appeal against such decision through the Bank to the President.

(4) The President may reject or approve the recommendation of the Bank with such modification as he may deem fit.

15. (1) Every bank shall maintain with the Bank cash reserves, and special deposits and hold specified liquid assets or stabilisation 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 Decree 1991.

(2) Where both assets and liabilities are due from and to other banks, they shall be offset accordingly, and any surplus of assets or liabilities shall be included or deducted, as the case may be, in computing specified liquid assets.

(3) In the case of the long-term advances to a bank or by an overseas branch or office of a bank, the advances may, with the approval of the Bank, be excluded from the demand liabilities of the bank.

(4) Every bank shall -

(a) furnish within a reasonable time any information required by the Bank to satisfy the Bank that the bank is observing the requirements of subsection (1) of this section;

(b) not allow its holding of cash reserves, specified liquid assets, special deposits and stabilisation securities to be less than the amount which may, from time to time, be prescribed by the Bank;

(c) not during the period of any deficiency grant or permit increases in advances, loans or credit facilities to any person without the prior approval in writing of the Bank.

(5) Any bank which fails to comply with any of the provisions of subsection (4) of this section is guilty to an offence and liable on conviction to a fine of-

(a) in the case of paragraph (a) N50,000 for every day during which a default under that paragraph (a) exists;

(b) in the case of paragraph (b), one per cent of the shortfall for each day during which the deficiency under that paragraph exists;

and the Bank may also, during the period when the bank fails to comply with any of the requirements of subsection (4) as aforesaid, withdraw any privileges or facilities that are nor accorded to the bank.

(6) For the purposes of this section, specified liquid assets provided they are freely transferable and free from any lien or charge of any kind shall, without prejudice to the provisions of section 39 of the Central Bank of Nigeria Decree 1991, consist of all or any of the following, that is-

(a) currency notes and coins which are legal tender in Nigeria;

(b) balances at the Bank;

(d) Treasury Bills and Treasury Certificates issued by the Federal Government;

(e) inland bills of exchange and promissory notes rediscountable at the Bank;

(f) stocks issued by the Federal Government with such dates of maturity as may be approved by the Bank;

(g) negotiable certificates of deposit approved by the Bank; and

(h) such other negotiable instruments as may, from time to time, be approved by the Bank for the purpose this subsection.

Back to Page One

Duties of Banks

16. (1) Every bank shall maintain a reserve fund and shall, out of its net profits for each year (after due provision made for taxation) and before any dividend is declared, where the amount of the reserve fund is-

(a) less than the paid-up share capital, transfer to the reserve fund a sum equal not less than thirty per cent of the net profits; or

(b) equal to or in excess of the paid-up share capital, transfer to the reserve fund a sum equal to not less than fifteen per cent of the net profit:

Provided that no transfer under this subsection shall be made until all identifiable losses have been made good.

(2) Any bank which fails to comply with the provisions of subsection (10 of this section is guilty of an offence and liable on conviction to a fine of N500,000.

(3) Notwithstanding paragraphs (a) and (b) of subsection (10 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.

17. No bank shall pay dividend on its shares until-

(a) all its preliminary expenses, organisational expenses, shares selling commission, brokerage, amount of losses incurred and other capitalised expenses not represented by tangible assets have been completely written off;

(b) adequate provisions have been made to the satisfaction of the Bank for actual and contingent losses on risk assets, liabilities, off balance sheet commitment and such unearned incomes as are derivable therefrom;

(c) it has complied with any capital ration requirement as specified by the Bank pursuant to section 13(1) of this Decree.

18. (1) No manager or any other officer of a bank shall-

(a) in any manner whatsoever, whether directly or indirectly have personal interest in any advance, loan or credit facility; and if he has any such personal interest, he shall declare the nature of his interest to the bank;

(b) grant any advance, loan or credit facility to any person, unless it is authorised in accordance with the rules and regulations of the bank; and where adequate security is required by such rules and regulation; such security shall, prior to the grant, be obtained for the advance, loan or credit facility and shall be deposited with the bank;

(2) Any manager or officer who contravenes or fails to comply with any of the provisions of subsection (1) of this section is guilty of an offence under this section and liable on conviction to a fine of N100,000 or to imprisonment for a term of 3 years; and in addition, any gain or benefits, accruing to any person convicted under this section by reason of such contravention, shall be forfeited to the Federal Government, and the gains or benefit shall vest accordingly in that Government.

(3) Every director of a bank who has any personal interest, whether directly or indirectly, in an advance, loan or credit facility, or proposed advance, loan or credit facility from that bank, shall, as soon as practicable, declare the nature of his interest to the board of directors of the bank, and the secretary of the bank shall cause such declaration to be circulated forthwith to all directors.

(4) The provisions of subsection (3) of this section shall not apply in any case-

(a) where the interest of the director consists only of being a member holding less than five per cent of the shares of a company which is seeking an advance, loan or credit facility from the bank; or

(b) if the interest of the director may properly be regarded by the Bank as not being material.

(5) For the purpose of subsection (3) of this section, a general notice given to the board of directors of a bank by a director of such bank to the effect that he is-

(a) an officer or member holding five per cent or more of the shares of a company or firm specified in the notice; and

(b) to be regarded as having personal interest in any advance, loan or credit facility which may after the date of the notice, be made to that company or firm,

shall be deemed to be a sufficient declaration of interest in relation to any such advance, loan or credit facility, if-

(i) the notice specifies the nature and extent of his interest in the company or firm;

(ii) the interest is not different in nature to or greater in extent than the nature and extent specified in the notice at the time the advance, loan or credit facility is made; and

(iii) the notice is given at the meeting of the board of directors or the director takes reasonable steps to ensure that it is brought up and read at the next meeting of the board of directors after it is given.

(6) Every director of a bank who holds any office or possesses any property whereby, whether directly or indirectly, duties or interests might be declare at a meeting of the board of directors of the bank, the fact and the nature, character and extent of the interest;