Section 15-22 Nigerian BOFIA 2020
Section 15-22 BOFIA 2020
Section 15, 16, 17, 18, 19, 20, 21, and 22 of the Bank and Other Financial Institutions Act 2020 is under Part II (DUTIES OF BANKS) of the Act.
Section 15 BOFIA 2020
Maintenance of reserve fund
(1) Every bank shall maintain a statutory reserve fund and shall, out of its net profits for each year after due provision has been 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 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 not less than fifteen per cent of the net profit: Provided that no transfer under this subsection shall be made until all identifiable losses and accumulated losses have been made good.
(2) Any bank which fails to comply with the provisions of subsection (1) of this section is guilty of an offence and liable on conviction to a fine of not less than N2,000,000.
(3) 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) of subsection (1) of this section 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.
Section 16 BOFIA 2020
Restriction of dividend
(1) 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 assets, liabilities, off balance sheet commitments and such unearned incomes as are derivable therefrom;
(c) it has complied with any capital ratio requirement as specified by the Bank pursuant to section 13 of this Act; and
(d) it has satisfied any other corporate governance and prudential requirements that may be stipulated by the Bank from time to time.
(2) 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 term of imprisonment of not less than 3 years or to a fine of not less than N2,000,000 or to both such imprisonment and fine.
Section 17 BOFIA 2020
Disclosure of interest by Directors, Managers and Officers
(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 the manager or officer has any such personal interest, such manager or officer shall declare the nature of such interest to the bank; or
(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 in line with the regulations on collateralisation issued by the Bank from time to time.
(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 imprisonment for a term of not less than 3 years or
to a fine of not less than N5,000,000 or to both such fine and imprisonment; and in addition, any gains or benefits, accruing to any person convicted under this section by reason of such contravention, shall be forfeited to and vested in the bank.
(3) It shall be the duty of a director of a bank who is in any way, whether directly or indirectly, interested in the grant of an advance, loan or credit facility by the bank, to declare the nature of such interest before the meeting of the board of directors of the bank at which the request for the advance, loan or credit facility is first taken into consideration.
(4) In a case where the director becomes interested in any advance, loan or credit facility after it is granted, the declaration shall be made to the board of directors immediately.
(5) For the purpose of this section, a general notice given to the board of directors of a bank by a director to the effect that such director 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 in writing and given at a meeting of the board of directors of 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.
(6) It shall be the duty of a director of a bank who is in any way, whether directly or indirectly, interested in the grant of an advance, loan or credit facility with a bank other than the bank in which such person is a director, to declare the nature of such interest in writing to the Bank prior to the grant of the advance, loan or credit facility by that other bank and in a case where the director becomes interested in any advance, loan or credit facility from another bank after it is granted, the declaration shall be made to the Bank immediately.
(7) The provisions of subsections (3) and (6) of this section shall not apply in any case —
(a) where the interest of the director consists only of being a person holding less than 5 per cent of the shares of the company which is seeking an advance, loan or credit facility from the bank or such percentage as the Bank may from time to time prescribe; or
(b) if the interest of the director may properly be regarded by the Bank as immaterial.
(8) 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 —
(a) the notice specifies the nature and extent of interest in the company or firm;
(b) such interest is not different in nature from or greater in extent than the nature and extent specified in the notice at the time any advance, loan or credit facility is made; and
(c) the notice is given prior to the meeting of the board of directors of the bank.
(9) Every director of a bank who holds any office or possesses any property, whether directly or indirectly, or who by reason of holding such office or possessing such property, or otherwise howsoever, has duties or interests which might conflict with such director’s duties or interests as a director of a bank, shall declare before a meeting of the board of directors of the bank, the fact and the nature, character and extent of the duties or interest.
(10) The declaration referred to in subsection (9) of this section shall be required to be made at the first meeting of the board of directors of the bank held —
(a) after such person becomes a director of the bank; or
(b) if already a director, after such person takes office or came into possession of the property.
(11) The secretary of the board of the bank shall cause to be brought up and read any declaration made under subsection (3), (8) or (9) of this section at the next meeting of the board of directors of the bank after it is made and shall record any declaration made under this section of this Act in the minutes of the meeting at which it was made or at the meeting at which it was brought up and read.
(12) Any director who contravenes the provisions of subsection (3), (6) or (9) of this section is guilty of an offence and liable on conviction to a fine of not less than N5,000,000 or imprisonment for a term of 3 years or to both such fine and imprisonment.
Section 18 BOFIA 2020
Prohibition of interlocking directorship, etc.
(1) No bank shall—
(a) employ or continue the employment of any person who is, or at any time has been adjudged bankrupt or has suspended payment to or has compounded with his creditors or who is or has been convicted by a court for an offence involving fraud or dishonesty, or professional misconduct; or
(b) be managed by a management agent except as may be approved by the Bank.
(2) Except with the approval of the Bank, no bank shall have as a director, any person who is a director of —
(a) any other bank; or
(b) any company or entity which has significant influence on the bank:
Provided that in the case of a financial holding company, the aggregate number of directors from the subsidiaries and associates shall not exceed 30 per cent of the members of the board of directors of the financial holding company and the number of directors of the financial holding company in the board of a subsidiary or associate shall not exceed 30 per cent of the members of the board of such subsidiary or associate.
(3) For purposes of subsection (2)(b) of this section, “significant influence” means direct or indirect ownership of five (5) per cent or more of the voting rights in the bank or controlling influence in the decision-making process of the bank.
(4) No bank shall be managed by a person who is —
(a) a director of any other company not being a subsidiary of the bank; or
(b) engaged in any other business or vocation whether remunerated or not except such personal or charitable causes as may be determined by the Bank and which do not conflict with or detract from their full-time duties.
(5) Every director of a bank shall sign and adhere to a code of conduct in such form or manner as the Bank may, from time to time, prescribe.
(6) The chief executive of a bank shall cause all the officers of the bank to sign and adhere to a code of conduct as may be approved by the board of directors.
Section 19 BOFIA 2020
Restrictions on certain banking activities
(1) A bank, specialised bank or other financial institution shall not, without the prior approval in writing of the Bank, grant
—
(a) 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 20 per cent of the shareholders’ funds unimpaired by losses in the case of a commercial bank, and 50 per cent of the shareholders’ funds unimpaired by losses in the case of a merchant bank, and in the case of specialised banks and other financial institutions, such percentage as the Bank may from time to time determine:
Provided that Bank may from time to time prescribe such other percentages as it may from time to time determine and shall have power to prescribe single obligor limits specific to non-interest banks having regard to their peculiarities;
(b) any advances, loans or credit facilities against the security of its own shares; or
(c) any unsecured advance, loan or credit facility except it is in line with the regulation on collateralisation as may be issued by the Bank.
(2) For the purpose of paragraph (a) of subsection (1) of this section 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 affiliates of a body corporate or such other related party as the Bank may by regulation, prescribe from time to time:
Provided that the provisions of paragraph (a) of subsection (1) of this section shall not apply to transactions between banks or between branches of a bank or to the purchase of clean or documentary bills of exchange, telegraphic transfers or documents of title to goods the holder of which is entitled to payment for exports from Nigeria or to advance made against such bills, transfers or documents.
(3) A bank shall not, without the prior approval in writing of the Bank −
(a) 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 from time to time by the Bank-
(i) to its directors, significant shareholders or any of them whether such advances, loans or credit facilities are obtained by its directors or significant shareholders jointly or severally;
(ii) to any firm, partnership or private company in which it or any one or more of its directors or significant shareholders is interested as director, partner, manager or agent or any individual firm, partnership or private company of which any of its directors or significant shareholders is a guarantor; or
(iii) to a public company or private company in which it or any one or more of its directors or significant shareholders jointly or severally, whether directly or indirectly, maintains shareholding of not less than five per cent or such percentage as may be specified by the Bank.
(b) permit to be outstanding to its officers and employees, unsecured advances, loans or unsecured credit facilities, which in the aggregate for any one officer or employee, is in excess of one year’s emolument to such officer or employee; or such amount as may be specified from time to time by the Bank.
(c) remit, either in whole or in part, the debts owed to it by any of its directors, or past directors or significant shareholders.
(4) Any loan advance, or credit facility granted to a director, shall continue to be treated and continue to be reported as insider related until it is fully liquidated irrespective of whether such director remains on the board of the bank or not.
(5) A bank shall —
(a) not lend more than five (5) per cent of its paid-up capital to any of its directors or significant shareholders provided that the aggregate of the bank’s exposure to all its directors and significant shareholders shall not exceed ten (10) per cent of its paid-up share capital or such percentage as the Bank may from time to time prescribe;
(b) in extending credit to any of its directors or significant shareholders, ensure that – (i) it does so on the same terms and conditions as those prevailing at the time, for comparable transactions by the bank with persons who are not directors or shareholders of the bank;
(ii) the grant of the credit does not involve more than the normal risk of repayment or present other unfavourable features;
(iii) it follows credit appraisal procedures that are not less stringent than those applicable to comparable transactions by the bank with persons who are not directors or shareholders of the bank:
Provided that nothing in this subsection shall prohibit any extension of credit made pursuant to a benefit or compensation programme that is widely available to employees of the bank; and
(iv) it does not give preference to any director or shareholder.
(6) In this section, the expressions —
“director”, includes director’s wife, husband, father, mother, brother, sister, son, daughter, their spouses, a company in which the director is also a director or shareholder or holds at least 5 per cent shareholding of the company, a company whose board, or managing director is accustomed to act in accordance with the advice, directions or instructions of the director and all other related parties as may from time to time be determined by the Bank;
“significant shareholder” means a person holding not less than 5 per cent of the shares of the bank or such other percentage as may from time to time be prescribed by the Bank and this shall include the shareholding of a wife, husband, father, mother, brother, sister, son, daughter, their spouses and all other related parties as may from time to time be determined by the Bank;
“unsecured advances 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.
(7) All the directors of a bank shall be liable jointly and severally to indemnify the bank against any loss arising from any advances, loans or credit facilities granted in contravention of this section.
(8) Without prejudice to provisions of section 20 of this Act, a bank shall not, without the prior approval in writing of the Bank −
(a) engage, whether on its own account or on a commission basis, in wholesale or retail trade, including import or export trade, except in so far as may exceptionally be necessary in the course of the banking operations and services of that bank or in the course of the satisfaction of debts due to it:
Provided that nothing in this paragraph shall be construed as precluding a bank from undertaking equipment leasing business or debt factoring;
(b) acquire or hold any part of the share capital of any financial or commercial or other undertaking, except —
(i) any shareholding approved by the Bank in any company set up for the purpose of promoting the development of the money market or capital market in Nigeria or of improving the financial machinery for financing economic development or related to the normal business undertakings of non-interest banks;
(ii) any shareholding approved by the Bank pursuant to subparagraph (i) of this paragraph, the aggregate value of which does not at any time exceed 10 per cent of the shareholders’ funds unimpaired by losses or such other limit as the Bank may prescribe from time to time; or
(iii) all shareholding acquired by a merchant bank while managing an equity issue:
Provided that the aggregate value of such acquisition does not at any time exceed the paid-up share capital of that bank or any other limit as the Bank may determine from time to time 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;
(c) acquire, hold either wholly or in part, the share capital of any financial or commercial or other undertakings in any foreign country:
provided that the aggregate shareholding of a bank in foreign subsidiaries shall not exceed ten per cent of its shareholders’ funds unimpaired by losses or such other percentage as the Bank may prescribe from time to time;
(d) purchase, sell, dispose, acquire or lease any real estate for whatever purpose.
(9) Notwithstanding the foregoing provisions of this section, a bank may secure debt on any real or other property, and in default of repayment, may acquire such property and exercise any power of sale, as may be provided for in any instrument or, by law prescribed, immediately upon such default or soon thereafter as may be deemed proper.
(10) Any director, manager or officer of a bank, specialised bank or other financial institution who fails to comply with the requirements of this section is guilty of an offence and liable on conviction to imprisonment for a term of not less than 3 years or a fine of not less than N5,000,000 or to both such imprisonment and fine.
(11) Any bank which after the commencement of this Act, enters into any transaction which is inconsistent with any provision of this section shall be liable to a penalty of not less than N20,000,000.
Section 20 BOFIA 2020
Acquisition of share in small and medium scale industries, etc.
(1) Subject to the approval of the Bank, a bank may acquire or hold part of the share capital of any agricultural, industrial, private equity or venture capital company subject to the following conditions:
(a) the private equity or venture capital company is set up for the purpose of promoting the development of indigenous technology or a new venture in Nigeria;
(b) the shareholding of the bank is in small or medium-scale industries and agricultural enterprises as defined by the Bank;
(c) the shareholding of 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 10 per cent of the bank’s shareholders’ funds unimpaired by losses and shall not exceed 20 percent of the paid-up share capital of the company or such other percentage as the Bank may prescribe from time to time;
(d) without prejudice to the provisions of section 19 (8) (b) (ii), and paragraph (c) of this subsection, the aggregate value of the equity participation of the bank in all enterprises shall not at any time exceed 20 per cent of its shareholders’ funds unimpaired by losses or such other percentage as the Bank may prescribe from time to time; and
(e) in the case of a non-interest bank, the activities of the agricultural, industrial, private equity or venture capital company shall be such as are permissible under non-interest banking principles.
(2) Subject to the prior written approval of the Bank, a bank may hold shares acquired in the course of the satisfaction of any debt owed to it, provided the shares acquired are not those of the bank’s subsidiary, holding company, associate or such other related party as the Bank may by regulation prescribe from time to time.
(3) Without prejudice to the provisions of subsection (1) of this section, a bank may hold or acquire the share capital of any other business, subject to the approval of the Bank.
(4) Every bank shall, within 21 days of the acquisition of any shareholding pursuant to subsection (1) and (3) of this section, give full particulars thereof to the Bank.
(5) Any bank which fails to comply with the provisions of this section shall be liable to a penalty of not less than N5,000,000 and an additional penalty of N100,000 for each day during which the infraction continues.
Section 21 BOFIA 2020
Restriction on operations of merchant banks
(1) A merchant bank shall not–
(a) accept any deposit withdrawable by cheque;
(b) accept any deposit below an amount which shall be prescribed, from time to time, by the Bank; or
(c) hold for more than six months any equity interest acquired in a company while managing an equity issue, except as stipulated in section Error! Reference source not found of this Act.
(2) Any merchant bank which acts in contravention of or fails to comply with any of the provisions of this section shall be liable to a penalty of not less N20,000,000 and an additional penalty of N500,000 for each day during which the infraction continues.
Section 22 BOFIA 2020
Display of information
(1) Every bank shall display at its offices and on its website:
(a) 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 non-interest or profit and loss sharing banks;
(b) its obligation to report transactions above the limits stipulated in the Anti-Money Laundering/Combating Financing of Terrorism guidelines/regulations and suspicious transactions to the Nigeria Financial Intelligence Unit;
(c) foreign exchange rates;
(d) certified true copy of its certificate of incorporation;
(e) abridged version of its last approved audited accounts; and
(f) such other information as the Bank may require from time to time.
(2) Any bank in breach of any of the provisions of this section is liable to a penalty of not less than N5,000,000 and an
additional N100,000 for every day during which the infraction continues.