Again, CBN Extends PMIs’ Recapitalisation Deadline To December

Indications have emerged that the Central Bank of Nigeria (CBN) have yet again extended the recapitalisation deadline for Primary Mortgage Institutions (PMIs) to allow the companies more time to recapitalise. LEADERSHIP gathered that the deadline for mortgage firms to shore up their shareholders’ funds has been extended by eight months from April, 30 to December 31, 2013. In a circular to all directors and shareholders of primary mortgage banks titled “Extension of the deadline for compliance with the revised guidelines for primary mortgage banks” the CBN said that this is to afford all affected PMBs sufficient time to exercise any of the options for capital raising, business combination and downscaling highlighted in the earlier circular dated December 14, 2012 CBN Director, Other Financial Institutions Supervision Department, Mr Olufemi Fabamwo, who signed the circular said, “Further to the CBN Circulars Ref: FPR/DIR/CIR/GEN/01/021 of February 15, 2012 and OFI/DIR/CIR/GEN/01/08 of December 14, 2012 titled “Circular to Primary Mortgage Banks on the Revised Guidelines for Primary Mortgage Banks”, this is to convey the decision of the Management of the Central Bank of Nigeria to extend the deadline for compliance with the Revised Guidelines for Primary Mortgage Banks (PMBs) from April 30, 2013, to December 31, 2013. “All PMBs are once again strongly advised to conduct due diligence and seek professional advice in exercising any of the options and to conclude the processes before the new deadline in order to allow sufficient time for capital verification and necessary regulatory approvals. All directors, particularly the Managing Directors/CEOs of all PMBs are again reminded that prior approval of the CBN is required before the disposal of assets of the bank, as they will be held jointly and severally liable for any asset stripping,” he said. Initially, CBN granted the mortgage firms a 12-month deadline from November 1, 2011, which would have terminated by December 12, 2012, but now extended to 18 months, by April 30, 2013. Under the new guidelines, mortgage companies have been categorised into national and state mortgage firms.  While the national PMIs are allowed to operate in any and all parts of the federation with minimum paid-up capital of N5 billion, the state PMIs are restricted to only one state and would have a minimum capital of N2.5 billion. The decision to extend the deadline again was likely informed by the fact that only about 25 companies have met the new capital requirement barely one month to the expiration of the deadline. Currently, the minimum capital requirement for mortgage firms stands at N100 million, which is contained in the 2003 guidelines that allows granting of loans or advances for the purchase or building, improvement or extension of a dwelling/commercial house, acceptance of savings and deposits, management of pension funds/schemes, performing estate management duties as well as offering of project consultancy services for estate development and engaging in estate development through loan syndication. Specifically, under new guidelines, PMIs would only be allowed to perform duties such as mortgage finance, real estate construction finance acceptance of savings and time/term deposits, acceptance of mortgage-focused demand deposits. It clearly streamlines the activities of a PMB to the provision of mortgage finance and exclude other related activities e.g. the provision of estate management duties, etc. The President, Mortgage Banking Association (MBAN), Mr. Abimbola Olayinka had said last month that  only 25 PMIs out of over 70 firms may survive the April recapitalisation deadline set by the CBN for the mortgage sector. He said then that merger talks were going on in the sector as 45 PMIs were in danger of not meeting the deadline. He said, ‘We have been on the recapitalisation issue for the past two years. The CBN has given the mortgage sector enough time. A lot of companies are going into merger; it should be a done deal between March and April. We will probably have 25 banks from the 70 banks we have now Leadership