Senate passes 29-year-old BOFIA Amendment Act

The Nigerian Senate yesterday passed a bill to amend the Banks and Other Financial Institution Act (BOFIA) that was enacted over 29 years ago.

With the passage yesterday, the governor of Central Bank of Nigeria (CBN) now has the powers to impose and review penalties on prevalence of infractions in the banking sector to a maximum amount of N100 Million.

The new amendment has also allowed for the creation of a Special Tribunal for the enforcement and recovery of eligible loans and also the speedy resolution of Loan related matters.

The passage was sequel to the presentation of the report of the Senate Committee on Banking, Insurance and other Financial Institutions by the Chairman, Senator Uba Sani, APC, Kaduna Central on the Banks and Other Financial Institutions Act CAP B3 LFN 2004( Amendment) Bill, 2020.( S.B.178)

The Bill which was read the third time and passed yesterday, also makes for the establishment of a Banking Sector Resolution Fund which would be funded by the CBN, Nigeria Deposit Insurance Corporation, NDIC, banks as a fall back for the administration costs of a failing bank.

Meanwhile, in the new bill, the powers President of the country has to prescribe Trade Unions, was dropped from the Bill due to existing labour Laws and also the Nation’s commitments to the International Labour Organisation, ILO.

In the approved Bill, single Obligor limits for Merchant Banks was revised to 50 percent of unimpaired shareholders funds; while the single Obligor limits for specialised banks and other Financial Institutions will be a percentage determined by the CBN Governor from time to time, just as unsecured lending for Directors of Banks was reviewed downwards from N3,000,000 to N1.000.000 without prior approval of the CBN.

According to the Uba Sani, the Banks and Other Financial Institutions Act (Repeal and Re-enactment) Bill 2020 seeks to update the existing Act and bring it in line with global best practices.

Other objectives, according to him include ‘better clarifying and accurately delineating the regulatory functions of the Central Bank of Nigeria in the financial services industry and updating and incorporating the laws for enacting, licensing and regulation of Micro-Finance Banks in the country.

The old Act which was enacted about 30 years ago and has, according to the senator has become obsolete as a lot of changes have taken place in the strategic banking sector giving rise to new and emerging challenges and opportunities.

He enumerated the objectives of the bill as seeking to update the laws governing Banks, Financial Institutions and Financial Services Companies as well as to enhance efficiency in the process of obtaining/granting banking licenses.

Other objectives, according to Senator Sani, include ‘better clarifying and accurately delineating the regulatory functions of the Central Bank of Nigeria in the financial services industry and updating and incorporating the laws for enacting, licensing and regulation of Micro-Finance Banks in the country.

The bill also aims to regulate the activities of Financial Technology Companies (FINTECHs) and to update commensurate penalties for regulatory breaches in the financial services sector and ensure these penalties are stiff enough to serve as a deterrent to potential breaches.’

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