The statutory reasons for their existence are economic stability,
and economic growth. Investors need huge funds to start a commercial bank.
To establish the bank you need to secure an operational
license. The central bank is responsible for the regulation and oversight of
commercial banks.
Functions
of Commercial Banks
Functions of commercial banks include acceptance of fixed
and saving deposits. They provide loans, advances, overdrafts and cash credits.
Other functions are call, bill discounting and demand/term
loan facilities. More are private equity financing, treasury management and
cash management.
They offer letter of credit, guarantees, perform inter
banking and offer various payment methods. The commercial banks also perform
agency and utility functions. The loan types are either secure or un secured
instruments.
List
of Commercial Banking Functions
- Acceptance of fixed and saving deposits
- Provide loans
- Advances
- Overdrafts
- Cash credits
- Bill discounting
- Demand/term loan facilities
- Private equity financing
- Treasury management
- Cash management
- Offer letter of credit
- Guarantee
- Perform inter banking
- Offer various payment methods
- Agency and utility functions
Regulations
and Arrangement
To start you need a commercial banking license. There are
prohibited and permitted activities guiding commercial banking operation.
You need to adhere to minimum regulatory standards for
national and international authorization. The central bank is mandated with
regional, national and international banking authorization.
Related How to Start Your Own Private Bank
Related How to Start Your Own Private Bank
How
to Start a Commercial Bank in Nigeria
Prohibitions
for Commercial Banks
Commercial banks are not allowed re-insurance or
insurance underwriting. They are not asset managers and no property trading.
The can not perform the duties of an issuing house or provide capital
underwriting services.
- No re-insurance services
- No Insurance underwriting
- No asset management services
- No property trading
- No issuing house functions
- No capital underwriting services.
Commercial
Banking License
A commercial banking license confers certain privileges
to approved practitioners. They can provide mortgage/retail services and take
deposits.
The banks deal in foreign exchange, provide credit
facility and financing. Other permits include treasury management services and
custodian services.
They can invest in non-convertible debt instruments and
undertake fixed income trading. Other services are accepting deposits and act
as a settlement bank.
Statutory
Functions Prescribed by Central Bank
- Mortgage services
- Retail services
- Take deposits
- Deal in foreign exchange
- Provide credit facility
- Financing
- Treasury management services
- Custodian services.
- Invest in non-convertible debt instruments
- Undertake fixed income trading
Regional, National,
International Commercial Authorization
There are minimum standards for commercial banks for
regional authorization. The bank is required to have a minimum paid-up share
capital of Ten Billion Naira (N10, 000,000,000). Maintain financial statement
according to NASB.
The National Commercial Authorization should maintenance
paid-up share capital of Twenty Five Billion Naira. (N25, 000,000,000).The
International authorization attracts minimum paid-up share capital of Fifty
Billion Naira. (N50, 000,000,000).
Appropriate reporting structure, management framework and
risk management reporting is mandated. They need to provide a yearly financial
strength report and full compliance with central bank guidelines.
Related How to Start a Bank in India
Related How to Start a Bank in India
Commercial
Bank Paid-Up Share Capital Requirements
- The regional commercial bank (N10, 000,000,000) Billion Naira.
- The National commercial bank (N25, 000,000,000) Billion Naira.
- International paid-up share (N50, 000,000,000) Billion Naira.
0 comments:
Post a Comment