CBN moves to provide sweeping oversight of foreign banks 

The application to the CBN governor will also be accompanied with, among other requirements, a no objection letter (or approval) from the home supervisory authority conveying its consent for the establishment of the representative office; evidence of payment of non-refundable application fee of N5 million to the CBN; board resolution supporting the foreign parent’s decision to invest in the equity shares of the proposed representative office; and evidence of name reservation with the Corporate Affairs Commission (CAC).

The CBN, in a circular to representative officers of foreign banks in Nigeria, stakeholders and the general public, with reference number FPR/DIR/PUB/CIR/001/059, dated October 12, 2022 and signed by Chibuzo A. Efobi, its director of financial policy and regulation department, explained that the exposure draft of the proposed guidelines is aimed at generating comments and observations by concerned stakeholders before further implementation by the CBN.

The draft guidelines, issued by the apex bank under the CBN Act, 2007 and the Banks and Other Financial Institutions Act, Laws of the Federation of Nigeria, 2020 (BOFIA), cover the scope and applicability of the guidelines, permissible and non-permissible activities for representative offices, as well as licensing, governance, reporting and operational requirements.

“The Guidelines shall be read in conjunction with the provisions of the CBN Act, the BOFIA, other subsidiary legislations made under the Acts, as well as written directives, notices, circulars, frameworks and other guidelines that the CBN and other regulators in the financial services sector have issued or may issue from time to time,” the CBN said.

According to the CBN, a representative office of a foreign bank is a liaison office of the foreign bank licensed by the apex bank, whose sole object is to market the products and services of its foreign parent as well as serve as liaison between its foreign parent and local banks, other financial institutions, private companies and the general public.

In this regard, the CBN explained that the requirements are applicable to three categories of institutions – a bank licensed under any foreign law, whose registered head office is outside Nigeria; any financial institution licensed under foreign law, whose primary business includes the receipt of deposits, granting of loans and/or provision of current and savings accounts; and any foreign-owned and foreign-based operating bank/financial holding company that owns controlling interest in one or more banks or institutions whose primary business includes the receipt of deposits, granting of loans and provision of current and savings accounts.

Furthermore, the guidelines require promoters of the proposed representative office to attend an interview session and make a presentation (with its logo, branding, etc) to the CBN and submit a detailed business plan or feasibility report.

The business plan or feasibility report is expected to include, at least, the purpose of establishing the representative office; justification for the application; ownership structure of the foreign parent in a tabular form indicating the name of proposed investor(s), profession/business and percentage shareholdings; current organogram, business lines and historical background of the foreign parent; list of branches, subsidiaries and countries in which the foreign parent operates from or has a presence; organisational structure of the representative office showing functional units, responsibilities, reporting relationships and grade of heads of departments/units; and names, addresses, curriculum vitae, means of identification, BVN (if applicable), tax clearance certificate and police clearance of proposed directors; schedule of services to be rendered.

It should also include annual financial statements of the foreign parent for a period of five years; sources of funding for the representative office’s operations and five years financial projection; details of information technology requirements and facilities; draft copy of the representative office’s Memorandum and Articles of Association (MEMART); a written and duly executed undertaking/statement by the foreign parent that its representative office shall comply with all applicable laws, rules and regulations of Nigeria; and draft shareholders agreement, unless it is 100 percent owned by the foreign parent bank.

The above requirements, the guidelines said, are for securing an Approval-in-Principle (AIP). Getting a final approval further requires the promoters of a proposed representative office to submit an application for the grant of a final licence to the CBN not later than three months after obtaining the AIP. Such application will be accompanied with evidence of payment of non-refundable licensing fee of N10 million to the CBN; certified true copy (CTC) of Certificate of Incorporation of the business; CTC of MEMART; CTC of Form CAC 1.1; evidence of location of the office (rented or owned) for the take-off of the business; names, addresses and CVs of management staff; schedule of changes, if any, in the board and shareholding after the grant of AIP; and copies of letters of offer and acceptance of employment in respect of the management team.

Following final approval by the CBN, the representative office will be required to use the parent’s name only in conjunction with the description “representative office” in its documents and correspondences, including office signage, letterheads and business cards; obtain the CBN’s prior clearance for employment of its prospective employees and top management staff; and inform the CBN of its proposed hours of business.

Furthermore, no representative office shall be relocated or closed without the prior written approval of the CBN, any proposal to close a representative office must be advised to the CBN at least three months before such closure, and adequate notice of the relocation or closure of the representative office shall be given to members of the public for a period of not less than one month prior to the date of relocation and two months before closure.

According to the draft guidelines, approved representative offices shall be permitted to market the products and services of its foreign parent or an affiliate of the foreign parent licensed and domiciled outside Nigeria; carry out research activities in Nigeria on behalf of the foreign parent; serve as a liaison between the foreign parent and local banks, private institutions within Nigeria and other customers of the foreign parent based in Nigeria; and pursue business opportunities for the foreign parent or affiliated institutions regarding the availing and/or syndication of foreign currency denominated loans.

Approved representative offices are also allowed to connect banks and other financial institutions to its foreign parent; assist exporters in Nigeria with information related to the laws and markets of target countries in which the foreign parent or any of the Group’s affiliates has a subsidiary; facilitate seminars, forums and other activities within Nigeria through which a foreign parent may meet with and hold further discussions with existing or potential customers in Nigeria; collate and distribute economic and financial information or country reports to its foreign parent for use by customers of the foreign parent and assist customers of the foreign parents that desire to invest in Nigeria or do business with Nigerian companies, and connect exporters in Nigeria with potential customers in jurisdictions where the parent company operates and assist Nigerian exporters with finding  new markets through its international offices.

On the other hand, such approved representative offices will be prohibited from providing services designated in Nigeria as banking business; providing any commercial or trading activity that may lead to the issuance of invoices for services rendered; accepting orders on behalf of the foreign parent; and engaging directly in any financial transaction, save for those transactions that are related to marketing the products and services of its foreign parent or an affiliate of the foreign parent licensed and domiciled outside Nigeria.

Stating its supervisory role and position concerning the activities of the representative office, the CBN said it would have free, full, unfettered and timely access to the internal systems documents, reports, records, staff and premises of the representative office and shall exercise such powers as it may deem necessary.

The apex bank also stated that it may cause an examination of the operations and affairs of the representative office to be made by its officers or such other duly qualified person as it may appoint. This, it explained, is to assess whether the representative office is complying with the banking laws and any guidelines or instructions issued by the CBN.