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CBN releases framework for MRC operation

By on March 17, 2013

The Management of the Central Bank of Nigeria (CBN) has approved the Regulatory and Supervisory Framework for the operations of a Mortgage Re-finance Company (MRC) as an exposure draft.

The framework provides for the licensing and establishment of  MRC as a specialised second-tier institution which would provide short-term liquidity, long-term funding and/or guarantees to mortgage originators and housing finance lenders.

It also states the permissible and non-permissible activities which the MRC shall engage in.

According to the CBN, the MRC shall engage in refinancing of fully secured mortgage loans, investment in debt obligations issued or guaranteed by the Federal Government of Nigeria or any of its agencies, issuing guarantee for mortgage loans as part of its off-balance sheet engagements, issuing bonds and notes to fund its purchase of eligible mortgages and other activities as may be prescribed by the apex bank from time to time.

The no-go areas include granting consumer or commercial loans; acceptance of demand, savings and time deposits, or any type of deposits; estate construction finance; estate agency or facilities management, project management for real estate development; management of pension funds/schemes., and all other businesses not expressly permitted by the CBN.

Apart from stipulating a minimum capital of N5 billion, the framework states other requirements before Approval in Principle (AIP) will be granted for operation of MRC.

No proposed MRC shall incorporate/register its name with the Corporate Affairs Commission (CAC) until an Approval in Principle (AIP) has been obtained from the CBN, in writing, a copy of which shall be presented to the Corporate Affairs Commission for registration.

After obtaining the AIP, the CBN also enumerates other conditions which the MRC shall fulfill before starting operation.

On financial requirements, the framework provides for, apart from the minimum capital;  non-refundable application fee of N100,000.00, non-refundable licensing fee of N200, 000.00 and change of name fee of N50,000.00.

On corporate governance stipulation, it provides that the ultimate responsibility for every MRC’s 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 fifteen, adding that 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 licensed bank directors as specified in the BOFIA, or as may be specified by the bank from time to time.

Furthermore, it provides that the executive directors of the MRC shall hold office for a fixed term of not more than five years and such term may be renewed only once, while non-executive directors shall serve for a fixed term of not more than four years and such term may be renewed only twice.

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 five-year terms may equally serve as Managing Director, if so appointed, for the maximum of two five-year terms (a combined maximum of 20 years), the CBN stated.

 

[Daily Independent]