* To licence private asset management companies with N10bn capital base….
The growing non-performing assets of banks and the slow recovery efforts by the Assets Management Company of Nigeria (AMCON) have compelled the Central Bank of Nigeria (CBN) to consider licensing private asset management companies (PAMCs) to complement the bad bank’s role in managing non-performing assets of the industry.
The move would liberalise the management of non-performing assets and make it competitive as against AMCON’s monopoly of the business.
This is contained in an exposure draft on the subject prepared April 2017 and sent as an attachment in a circular to all banks and financial institutions on June 14, 2017. Kelvin Amugo, director of financial policy regulations of the CBN signed the circular. The CBN said it appreciates receiving comments on the subject latest July 5, 2017.
In the exposure draft, entitled framework for licencing, regulation and supervision of the business of private asset management companies sent to the industry for comments and observation, the CBN said “developments in the Nigerian banking industry have necessitated the need for licencing private asset management companies to play complementary roles in the management of non-performing assets in the financial services industry.”
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According to the exposure draft, the PAMCs would be licenced by the CBN as other financial institutions to acquire, manage, restructure and dispose off eligible assets of banks, other financial institutions and banks in liquidation.
The private asset management companies shall be independent legal entities with a primary focus on the purchase, management and disposal of eligible assets of banks and other financial institutions; they shall be privately owned and have ‘asset management company’ as part of their names and objective clause; and they shall be surpervised and regulated by the CBN as other financial institutions.
The requirements for grant of approval in-principle (AIP) for the companies include: non-refundable application fee of N500,000; evidence of payment of N10 billion specified paid-up capital; detailed business plan; and a comprehensive bio-data of sponsors of the companies.
Other requirements are details of the proposed sources of equity contribution (if a loan is obtained, such loan must be long term. not less than seven years and must be taken from Nigerian financial institutions), and clear means of identification of shareholders and directors.
Not later than six months after obtaining AIP, the promoters of the proposed PAMCs, having met the conditions in the AIP, shall submit an application for the grant of final licence accompanied with a non-refundable licencing fee of N2 million payable to the CBN.
The terms of licence shall include non-transferability as the licence would be granted for an indefinite period and a change of name shall attract the sum of N200,000 only payable to the CBN.
Licenced PAMCs shall be prohibited from the following activities: provision of credit to customers, acceptance of deposits from customers, provision of guarantees for loans, obtaining loans from banks and other financial institutions; issuance of securities to banks and other financial institutions, and provision of fund management services to third parties.
Equally, there shall not engage in ‘sale and buy-back’ of eligible assets with banks and other financial institutions, the acquisition of any eligible assets in respect of they have provided services, and any other business that may be prohibited by the CBN from time to time.