SAN FRANCISCO, November 17, (THEWILL) – The Central Bank of Nigeria (CBN) and Nigeria Deposit Insurance Corporation (NDIC) have been empowered to establish a banking sector resolution fund to save struggling banks.
This was contained in the newly signed Banks and Other Financial Institutions Act (BOFIA) signed into law on Thursday, November 12, by President Muhammadu Buhari.
The act indicates that the governor of CBN is to determine when the resolution fund will commence and each bank, specialised bank and other financial institutions in Nigeria under the regulation of CBN, will be required to pay an annual levy.
The fund will be used to pay operating costs of a bridge bank; costs of transferring the whole or any part of the business of a bank pursuant to a resolution measure and provide a loan, advance, overdraft, or other credit facilities to a bank under resolution or a bridge bank; to pay any other costs reasonably incurred in the resolution measure.
“The resolution fund shall not be subject to tax and accordingly, all monies accruing to, payments made from, and instruments and transactions relating to, the resolution fund shall be exempt from all forms of taxes, levies, duties, charges, or imposition howsoever described,” the act read.
“On the commencement date of the resolution fund, and on the first business day in each calendar year thereafter, the bank shall pay into the resolution fund, the sum of N10 billion or such amount as the board of the bank may from time to time determine.”
It also disclosed that NDIC “shall pay into the resolution fund, the sum of N4 billion or such amount as the board of the bank may from time to time determine”, at the commencement date, and thereafter, on the first business day in each calendar year.
“Any annual levy paid by a bank, specialised bank or other financial institution in pursuance of this act, shall be deductible for the purposes of the companies’ income tax of the paying bank, specialised bank or other financial institution under the companies income tax act,” the act read.
“A bank, specialised bank or other financial institution that is in default of payment of the levy imposed under this act or any part, thereof shall be prohibited from paying dividends or other purposes of the resolution fund.”