The Central Bank of Nigeria (CBN) has unveiled to members of the public, a draft document for licencing of Private Asset Management Companies (PAMCs) that are expected to play complementary roles in the management of non-performing loans in the country.
The CBN, in the exposure draft for the licencing and regulation of PAMCs in Nigeria, signed by its Director, Financial Policy and Regulation, Mr. Kelvin Amugo, a copy of which was posted on its website, explained that developments in the Nigerian banking industry necessitated the initiative.
This shows that the sunset period of the Asset Management may be drawing nearer.
The draft framework stated that “given the ever evolving developments in the industry, the decline in international commodity prices with its consequent impact on risk assets in the industry, it has become expedient to proactively widen the space for the management of NPLs through the establishment of PAMCs.
“This is in line with the CBN’s core mandate of promoting a sound and stable financial system in Nigeria.”
The document described the PAMC as a privately owned institution licenced by the CBN as an Other Financial Institutions (OFIs) to acquire, manage, restructure and dispose of Eligible Assets of Banks, OFIs and banks in liquidation.
According to the draft framework, the PAMC would perform the functions of AMCON, which included buying off assets off bans and other financial institutions and disposing them.
Also, they would be expected to provide consultancy and advisory services to banks and other financial institutions for the purpose of restructuring receivables and other assets including sale of such assets to third parties.
They would however not be allowed to operate as banks by taking deposits or granting loans neither would they be able to obtain credit from banks and other financial institutions in the county. To be licenced, a PAMC would need a N10 billion paid up capital.
In terms of risk management, the framework requires that PAMCs develop an enterprise risk management framework which will serve as a guide in the identification, measurement monitoring and control risk.
It added: “The ERM framework should be approved by the board of directors and cover the different forms of risks to which a PAMC may be exposed. Such risks include liquidity, credit, operational market, legal and compliance risks.”
The Managing Director and Chief Executive of the Nigeria Deposit Insurance Corporation (NDIC) had hinted of plans to introduce private assets management companies.
AMCON was established on the 19th July 2010. It was created to be a key stabilising and re-vitalising tool aimed at reviving the financial system by efficiently resolving the non-performing loan assets of the banks in the Nigerian economy.
Nigerian banking sector non-performing loans rose to 11.7 per cent in 2016, up from 5.3 per cent the previous year.