September 13, 2010 / 11:58 AM / in 7 years

Nigeria's universal banking model to end in October-cbank

* Issuance of universal banking licences to end on Oct. 4

* Lenders have 90 days to detail how they will comply

* Aim is to avoid repeat of last year’s banking crisis

By Chijioke Ohuocha

LAGOS, Sept 13 (Reuters) - Nigeria will stop issuing universal banking licences next month and enforce new minimum capital requirements for lenders in a bid to avoid a repeat of last year’s near collapse of several banks.

Central Bank Governor Lamido Sanusi, who launched a historic $4 billion bailout of nine banks shortly after taking office last year, has pledged to reform the industry and get credit flowing to the productive real sector and small businesses.

Sanusi announced in February that he wanted to separate banks’ core lending business from more speculative capital markets activities -- such as stockbroking, asset management, private equity and venture capital -- to protect depositors’ funds. But he gave no detailed timeframe then.

The new banking model requires lenders to sell all non-core businesses and form a holding company if they intend to carry out insurance, asset management and capital market activities.

The guidelines will come into effect in sub-Saharan Africa’s second-biggest economy from Oct. 4, and give lenders 90 days to prepare and submit their plans on compliance to the regulator.

“The central bank will discontinue the issuance of universal banking licences (and) prohibit banks from undertaking non-banking activities while new licences are to be issued,” the central bank said in a statement.

Sanusi’s reforms aim to overhaul a banking sector until now characterised by swollen institutions concerned primarily with outstripping their rivals’ asset growth at the expense of creating loans and growing their business.

The regulator said its primary objective was to ensure banks were effectively supervised and depositors’ funds were safe.

In the guidelines, lenders will now operate as regional, national or international banks. International banks would need 50 billion naira minimum capital to operate, regional banks 10 billion naira, while national banks require 25 billion naira.

National banks will operate in all of Nigeria’s 36 states, while regional lenders will only operate within 6-12 states.

Several of Nigeria’s banks have already indicated how they intend to comply with the new regulations.

First Bank said in April it planned to form a listed holding company which will own the bank and its subsidiaries

Skye Bank said in May it was also considering a holding company structure and that it was confident of reaching the minimum capital for international status.

Others have said they plan to spin off subsidiaries but have not yet given details, although bankers have also voiced concerns that the move could have significant tax implications and that many hurdles remain to be crossed before the new structures can be implemented. (For more Reuters Africa coverage and to have your say on the top issues, visit: (Editing by Nick Tattersall, Ron Askew)

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