Sanusi Lamido Sanusi
. Pegs capital base at N5bn
As part of efforts to ensure the success of the recently inaugurated Mortgage Refinance Company (MRC), the Central Bank of Nigeria (CBN) Thursday introduced a regulatory and supervisory framework for the operation of the company.
The 38-page document posted on the central banks website yesterday stated that the MRC shall commence operations with, and maintain at all times, a minimum paid-up capital of N5 billion.
It also stated that a MRC should maintain, at all times, a minimum ratio of core capital to total assets (leverage ratio) of not less than five per cent.
In addition, the framework stipulated that the core or tier 1, capital of the company should consist of paid-up capital and reserves plus retained earnings, statutory reserves, other reserves and published current earnings, less goodwill and other intangible assets and identified losses, or as otherwise defined by the central bank for licenced financial institutions.
The establishment of an MRC is primarily aimed at increasing the liquidity within the mortgage sub-sector and availability of mortgage credit in Nigeria, reduce mortgage and related costs, and make residential housing more affordable.
The benefits of such mortgage liquidity facilities are globally acknowledged. As a financial institution, the MRC would be under the regulatory and supervisory purview of the CBN.
The document added: The MRC shall maintain at all times a minimum ratio of qualifying capital to the value of its risk-weighted assets of not less than 10 per cent. Asset risk weights to be used for this computation shall be those prescribed by the Bank for licensed banks.
Nonetheless, the central bank stated that the MRC would not be allowed to granting consumer or commercial loans; originate primary mortgage loans; accept demand, savings and time deposits, or any type of deposits; finance real estate construction; undertake estate agency or facilities management; provide project management services for real estate development and manage pension funds or schemes.
On the licensing requirement, the CBN explained that the procedures and criteria to be used in granting a licence to the MRC would be the same as specified for banks under the Banks and Other Financial Institutions Act, CAP B3, Laws of the Federation of Nigeria, 2004 (herein after referred to as BOFIA) and any other regulations issued by the Bank.
The ultimate responsibility for every MRCs operations shall be vested in its Board of Directors. The number of directors on the board of the MRC shall be a minimum of seven and a maximum of 15. The non-executive members must be at least twice the number of the executive directors at any point in time.
The Bank shall approve the appointment of each director who shall meet the qualifications for licenced bank directors as specified in the BOFIA, or as may be specified by the Bank from time to time, it added.
Continuing, it stated that executive directors of the MRC are expected to hold office for a fixed term of not more than five years and such term may be renewed only once, while non-executive directors would serve for a fixed term of not more than four years and such term may be renewed only twice.
It stated: For the avoidance of doubt, the maximum tenure of an executive director shall not exceed a total of 10 years while a non-executive director shall not serve for periods exceeding 12 years in total.
Any executive director who has served two 5-year terms may equally serve as Managing Director, if so appointed, for the maximum of two 5-year terms (a combined maximum of 20years).