CBN bans mortgage banks from granting dollar loans

Central Bank of Nigeria (CBN) has barred Primary Mortgage Banks from granting foreign currency denominated mortgage loans to customers, according to a draft guideline for the licensing and regulation of Primary Mortgage Banks.

In the guideline, the CBN, said the operators are also barred from granting consumer or commercial loans, leasing facilities and engaging in estate agency or facilities/project management and real estate development as well as other activities that the CBN may classify as non-permissible from time to time.

Ibrahim Tukur, CBN director, Financial Policy and Regulation, who signed the draft guidelines, said it was in exercise of the powers conferred on it by the Central Bank of Nigeria Act and the Banks and Other Financial Institutions Act (BOFIA).

The regulator also set minimum capital (National PMB) at N8 billion, regional PMB at N5 billion and non-refundable application fee of N1 million and Non-refundable licensing fee of N2 million and N100,000 for change of name fee.

He said the new guidelines were to re-position the mortgage sub-sector with a view to harnessing its potentials for sustained economic growth. The guidelines introduced enhanced requirements for capital, risk management, internal control and corporate governance.

“Notwithstanding the measures put in place, the mortgage sub-sector continued to struggle against headwinds occasioned by unfavourable macroeconomic and other developments. The guidelines have been reviewed to strengthen primary mortgage banks as well as complement other on-going reforms in the mortgage sub-sector,” he said.

He said that Primary Mortgage Banks are permitted to engage in mortgage finance, real estate construction finance within the permitted limits, acceptance of savings, demand and time/term deposits, drawing from mortgage funds (such as National Housing Fund (and/or other related mortgage endowments) for on-lending and financial advisory services for mortgage customers.

The banks, are also authorised to grant granting mortgage/housing related consumer loans. These are enhancements to residential mortgages which shall be limited to furniture, home appliances and generators subject to a maximum of 10 per cent of total loans.

The mortgage banks are to also finance rent-to-own properties, home improvement loans, incremental housing finance and other activities the CBN may approve from time to time.

The new guideline also stipulated that the number of directors on the board of a Mortgage Bank shall be a minimum of seven and a maximum of 12.

The non- executive members shall outnumber the executive directors at any point in time. Also, for non-Nigerian directors, a certificate/statement of good conduct from the Police Service (or other appropriate authority) in country of domicile shall accompany the resume, completed Approved Persons Questionnaire and copies of academic and professional qualification certificates.

For resident non-Nigerian directors, reference shall be made to his employer, university, and legal permit to reside and work in Nigeria.

This is in addition to a certified true copy of the director’s passport, completed Approved Persons Questionnaire and copies of academic and professional qualification certificates.

Also, all directors and top management staff of Primary Mortgage Institutions shall comply with the requirements of the relevant governance codes, Approved Persons Guidelines and related regulations issued by the CBN from time to time.

“The CBN may at any time vary or review any condition of a licence or impose additional conditions. Where a licence is granted subject to certain conditions, the PMB shall comply with those conditions to the satisfaction of the CBN within such period as may be deemed appropriate in the circumstances. Any PMB that fails to comply with such conditions shall be guilty of an offence under BOFIA,” the guidelines said.