INTRODUCTION
The Banks and other financial institutions (BOFI)Act, Cap B3, laws of the Federation of Nigeria, 2004, which was enacted some years ago (about 29 years) was repealed, re-enacted and passed into law by the Senate and assented to by the President of Nigeria, President Muhammadu Buhari on November 12, 2020.
The objectives of the Banks and other Financial Institutions Act (hereinafter referred to as the Act) includes – to update laws governing financial institutions and financial services and bring it in line with modern trends in the banking sector ; enhance efficiency in the process of obtaining/ granting banking licenses; accurately delineate the regulatory functions of the central bank of Nigeria in the financial services industry; update and incorporate the laws for enhancing, licensing and regulation of micro finance banks, also to regulate the activities of financial technology companies (Fintechs) and update commensurate penalties for regulatory breaches in the financial services sector.
It is pertinent to note that the new act, in dealing with the current realities, deleted completely some provisions in the old Act. For example, Section 33(3) dealing with power of the CBN Governor to appoint one or more officers of the bank as examiner has been deleted. Sections 45 amongst others has also been deleted from the new act. The regulatory power of the CBN as the apex bank was made expressly and clear. Also, the Federal High Court was expressly given the exclusive jurisdiction to try all offences under the Act and to try some civil issues like challenging the revocation of licence of a bank. Furthermore, the new Act reviewed the penalty fees to be paid and penalties of imprisonment to be served for breach of any of the provisions of the Act by those concerned.
Hence, the purpose of this article is to examine the innovative provisions of the Banks and other Financial Institutions Act, 2020.
•Under Section 3 (3) of the new act, the Central Bank of Nigeria(hereinafter referred to as the Bank) may upon payment of the prescribed sum by the proposed bank, issue a license or refuse to issue a licence with or without conditions or refuse to issue a licence and the governor need not give any reason for such refusal.
• Under the new act, in section 3(4), where the Bank grants an application for licence, it shall in addition to giving written notice to the applicant, indicate the scope of the banking business in which the applicant can engage in.
• A new sub sections 5 and 6 have been added to Section 3 of the new Act. By sub section 5, any bank or its subsidiaries which has no physical presence in the country of incorporation and where it is licensed and is not affiliated with any financial services group that is subject to effective consolidated supervision shall not be allowed to operate in Nigeria no Nigerian bank or its subsidiaries shall establish or continue any relationship with such bank or subsidiary.
• Another significant provision of the new Act is Section 5 (6) which makes any director, manager, or officer of a bank who fails to take reasonable steps to secure compliance with any conditions of license guilty of an offence and liable upon conviction to imprisonment to a term not exceeding two years or a fine of Ñ 2,000,000 or for both such imprisonment and fine.
• Another laudable provision of the new Act is Section 12(1-6), dealing with “Revocation of Banking licence” which has been enlarged under the new Act to cover more grounds. Unlike the old Act which contains only one subsection, The section under the new Act has been enlarged to include 6 Subsections. The subsections variously contain provisions dealing with the appointment of the Nigerian Deposit Insurance Corporation (NDIC) as a liquidator of the affected bank whose licence has been revoked; the immediate payment by the CBN of private deposit liabilities of the bank before the commencement or compilation of the liquidation of the bank by the Corporation; the exclusive jurisdiction of the Federal High Court to entertain action to challenge the revocation of the licence of a bank, the time frame within which to hear and determine an action to challenge a revocation and an appeal against the decision of the Federal High Court in respect of same, time within which to commence an action in respect of revocation of the licence of a bank and so on. All of these are germane provision which are not contained in the 1991 Act.
• In Section 58 (1) & (2), no person shall carry on specialized banking or business of other financial institutions in Nigeria other than insurance, pension fund management, collective investment schemes and capital market, except it is a company duly incorporated in Nigeria and holds a valid licence granted under the provisions of the Act. Examples of “ Business of other financial institutions under the Act include business of a discount house, bureau de change, finance company, money brokerage etc.
The provisions of Section 6 is wide under the new Act than the old Act. Under the new Act, it states that “No bank or its subsidiaries may open or close any branch office, cash center or representative office anywhere within or outside Nigeria except with the prior consent in writing of the bank. Unlike the old Act, Section 6 (2) of the new Act proceeds to provide that “Any bank intending to close any of its branches or subsidiaries outside Nigeria shall give notice in writing to the Governor of its intention at least Six months before the date of the intended closure or within such shorter period as the governor may in any particular case allow.
• Another remarkable provision is Section 22 which is to the effect that every bank must display at its offices the following: Its obligation to report transactions above the limit of suspicious transactions to the Nigerian Financial Intelligence unit; its foreign exchange rates; and certified true copy of its certificate of incorporation etc.
Under the new Act, it is pertinent to state that some provisions vested so much power to the CBN governor(hereinafter referred to as the Governor) , protected the CBN banking officers against law suits. This can be seen in Section 51 of the new Act which intends to grant immunity from judicial intervention to the federal government, the CBN or any officer of the federal government or the CBN from any action claim or liability to any person in respect of anything done in his exercise of its duties under the Act. It is respectfully submitted that in a world where the actions of the financial sector and its regulators are bring brought, under closer scrutiny, granting immunity to the Bank and its officials from things done in the exercise of their administrative duties will have serious negative throwback on the country as a whole, jeopardize ability to engage in third party transactions and enable unbridled exercise of power by officers of the bank. In modern democracies, only heads of government carry such immunity.
• It is pertinent to categorically state that the new Act does not only increase the instances where these new powers can be executed, littered in the sections of the new law are cases of wider CBN controls ranging from approval for shutting down of branches in Section 6 of the Act, consent for the transfer of significant share holding of the bank in Section 7. The discretionary powers of the CBN in matters of approval and revocation of licence, minimum capital ratio requirements per time, the appointment of bank auditors and scope of sanctioning of erring banks were also covered in the new law.
• Section 36 of the new Act was added in respect of when a bank becomes a failing bank under Section 34(1) to the effect that some relevant agencies [which are listed under section 34(2)]shall cooperate with, render assistance, among other duties, as may be required by the Governor which are necessary to resolve a banking crisis occasioned whenever two or more of the four conditions (or such other conditions as the Governor may deem fit) stated therein.
• It is laudable that in the new Act, the powers of The Bank to intervene in a failing bank was extended beyond what was in the old Act to provide for The Bank taking additional measures provided in sections 37-42 for the bailing-in of a failing bank, specialised bank or other financial institutions so as to facilitate its rescue.
Section 45 of the new Act which is similar to section 46 of the old Act which provided for obtaining approval of the CBN by the bank for the continuous closure of a bank was expanded to not only provide for cases of strikes only but to also provide for outbreak of an epidemic or a pandemic. This provision is innovative considering the outbreak of the pandemic—Coronavirus which the old Act didn’t put into consideration. Thus, in the future, if there is an outbreak of a pandemic or epidemic and banks are of necessity for public health, defence, etc., required to be closed ,they are to notify The Bank within 24 hours for the continued closure.
• Section 68 deposits on the CBN the power to issue regulations to banks, specialised bank or other financial institutions to address cybersecurity issues in the delivery of financial or banking services. Considering the emergence and development of electronic banking and the simulatenous rise in cybercrime, this provision is laudable as it invests in The Bank the power to issue out regulations to address the cybercrime issues as they arise in the financial sector.
• Section 97 vested on the Governor the power to make an ex-parte application for an order of the Federal High Court to freeze any account with any bank, specialised bank or other financial institutions where he has reason to believe that transactions undertaken in that account may involve the commission of any crime under any law. Continuing, the Governor is to refer the matter to the necessary law enforcement agency for investigation of the suspected crime and where it is not possible for the appropriate law enforcement agency to conclude investigations, the Governor may again apply to the Federal High Court for the continued freezing of the account concerned.
• Section 99 provides that the Governor may by notice published in media and in the gazette reduce or increase the monetary penalty payable for the contravention of any of the provisions of the Act. The writers submit that this provision is added considering the frequent rise and fall in the value of the country’s currency compared to dollar.
• Section 100 provides that the Governor may exempt any other financial institution, non-interest bank or specialised bank from any of the provisions of the Act by a notice published in the media and in the gazette. It is to be noted that the Act does not require the Governor to state any reason(s) for exercising this power of exemption.
• Section 102 established a Special Tribunal for the Enforcement and Recovery of Eligible Loans. Sections 103-114 provided for the composition, functions, amongst others, of the tribunal. Section 105 provides for the jurisdiction of this special tribunal which include, amongst others, hearing matters pertaining to: enforcement and recovery of eligible loans by financial services banks, specialised banks and other financial institutions; enforcement of security or guarantee or attachment of any assets under an eligible loan made by a financial institutions to its customers.
• Section 122 provides for the powers of the Tribunal and the reliefs it can grant. Notable in this section is sub(3)(a & b) that provides that an application of stay of proceedings and leave to appeal in respect of interlocutory appeals shall not be granted on any circumstances; and that in respect of application of stay of execution pending appeal and leave to appeal a final judgement of the tribunal, the grant shall be conditional upon deposit by the applicant of the judgement sum to an intereat-yielding account in the name of the registry of the Tribunal. Also, sub (5) provides that no statute of limitation, be it federal or state, can apply or operate to bar or invalidate any claim brought before the Tribunal for the recovery of eligible debt.
• Another significant provision is Section 98 which states that subject to the provisions of Section 174(1) of the constitution of the Federal Republic of Nigeria any legal practitioner in the employment of the bank may, with the consent of the governor prosecute or defend criminal, civil or other proceedings in the name of and on behalf of the Bank, any bank, Specialised Bank or other financial institution in the course of carrying out the objectives of th Act. Furthermore, by the provision of Section 98 (2) it made room for the Bank to still engage the services of a private legal practitioner, asides that of the Bank in respect of any legal matter concerning the Bank.
• Microfinance Banks and Fin tech : one of the important gains of the Act is its,though subtle, recognition of the newest and fastest growing sectors of the industry – fintech and Microfinance Banks. First, the Act recognised the impact of technology in the financial sector and financial services and first added in the new act,in section 43(1)(c). as against the silence in the old act, that no person with the object of carrying out financial business shall register with corporate affairs commission with the word Fintech or any of its derivative in English or any other language in the description or title under which the person is carrying on business in Nigeria.
In conclusion, it can be boldly said that the Act vested so much power in the hands of the Governor to a very large extent, also, the Act is made up of good provisions that will enhance and restructure the banking system in Nigeria.
About the Authors
Okpara Matthew is a 300L Student of Nnamdi Azikiwe University. He is an avivd writer and legal researcher.
Ikedinobi Emmanuel, a 300L Student of Nnamdi Azikiwe University. He is an avivd writer and legal researcher.
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Very educating!