Banks and Other Financial Institutions Act 2020

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Questions and Answers

What is the minimum fine for a bank that fails to comply with relevant provisions?

N2,000,000 (correct)

N3,000,000

N500,000

N1,000,000

Which of the following is NOT a condition that must be fulfilled before a bank can pay dividends on its shares?

A certain percentage of net profits must be transferred to the shareholders (correct)

Adequate provisions for contingent losses have been made

Capital ratio requirements are met

All preliminary expenses have been written off

What action must a manager or officer take if they have a personal interest in a loan or credit facility?

Declare the nature of the interest to the bank (correct)

Ignore the interest and proceed with the loan

Dissolve the interest before making the loan

Transfer the interest to another officer

What is the imprisonment term for a director or officer who fails to comply with the requirements stated?

Three years Signup and view all the answers

What is one primary purpose of transferring net profits to the reserve fund?

To ensure sufficiency for business purposes Signup and view all the answers

What must the applicant do upon receiving notification of a granted licence?

Pay the prescribed licence fee Signup and view all the answers

What is the minimum penalty for a bank that contravenes the regulations regarding foreign banks without a physical presence?

N20,000,000 Signup and view all the answers

In what way can the Bank use sums deposited in accordance with an application for a non-interest bank?

Invest them in non-interest bearing securities Signup and view all the answers

What happens to the investment income if a licence is not granted after investment of a deposited sum?

The income is treated as income of the licenced institution Signup and view all the answers

What can the Bank do regarding the conditions of a granted licence?

Vary or revoke any conditions or impose new ones Signup and view all the answers

What is the consequence for a bank failing to comply with the conditions of its licence?

It is liable to a penalty of not less than N20,000,000 Signup and view all the answers

What is the additional penalty for each day a bank continues to contravene regulations after the first penalty?

N500,000 Signup and view all the answers

What can occur if a bank fails to comply with the minimum paid-up share capital requirement?

Revocation of the bank's license. Signup and view all the answers

How are voting rights distributed among shareholders in a bank?

Proportional to individual contributions to paid-up share capital. Signup and view all the answers

Under what condition can a suit be maintained against a registered holder of a share in a bank?

If the holder is a minor or has a mental illness. Signup and view all the answers

What can the Governor do with the approval of the Board concerning bank licenses?

Revoke the license if certain conditions are met. Signup and view all the answers

If a bank goes into liquidation, what is the status of its license?

The license is automatically revoked. Signup and view all the answers

What does it indicate if a bank is critically undercapitalised?

The capital adequacy ratio is below the prescribed minimum. Signup and view all the answers

What could be a reason for revocation of a bank's license?

Conducting business in an unsound manner. Signup and view all the answers

What ensures that no suit can be maintained against a registered shareholder due to another individual's title?

The inherent rights of registered shareholders. Signup and view all the answers

What action will result if a bank does not commence banking operations within 12 months after obtaining a license?

The bank's license is revoked. Signup and view all the answers

What is the minimum penalty for a bank that fails to comply with provisions stated in subsection (4)?

N5,000,000 Signup and view all the answers

Which of the following is included in the definition of specified liquid assets?

Treasury bills Signup and view all the answers

What percentage of net profits must a bank transfer to its statutory reserve fund if it is less than its paid-up share capital?

30% Signup and view all the answers

During a deficiency period, what must a bank obtain before granting increases in loans or credit facilities?

Prior approval in writing from the Bank Signup and view all the answers

Which of the following is NOT considered a regulated liquid asset?

Investment in real estate Signup and view all the answers

What is the required action if a bank's statutory reserve fund equals or exceeds its paid-up share capital?

Transfer at least 15% of net profits Signup and view all the answers

What happens if a bank continues to contravene the provisions beyond the initial penalty?

It incurs an additional penalty of N100,000 for each day of contravention Signup and view all the answers

What minimum percentage must a bank's holding of specified liquid assets be according to the requirements?

Equal to or less than prescribed amounts Signup and view all the answers

Which of the following statements is correct regarding identifiable losses before transferring to the reserve fund?

All identifiable losses must first be made good Signup and view all the answers

What may the bank require from a bank with a holding company?

To calculate and maintain a minimum capital adequacy ratio on a consolidated basis Signup and view all the answers

What are some of the prohibitions the bank may impose on non-compliant banks?

Accepting new deposits and paying cash dividends Signup and view all the answers

What powers does the bank have if a bank fails to comply with specified capital adequacy ratios?

To impose additional holding actions or prohibitions Signup and view all the answers

What is required from banks in terms of liquid assets?

To hold a minimum amount as prescribed by the central bank Signup and view all the answers

What may banks with a subsidiary be required to maintain?

A minimum capital adequacy ratio on a consolidated basis Signup and view all the answers

What should a bank do if it fails to meet specified capital adequacy ratios?

Prepare a capital reconstitution plan acceptable to the bank Signup and view all the answers

How are assets and liabilities due to other banks treated?

They must be offset, and any surplus included or deducted Signup and view all the answers

What happens to long-term advances under certain conditions?

They may be excluded from a bank's demand liabilities with approval Signup and view all the answers

Which activity may a bank be prohibited from if it fails to observe capital adequacy ratios?

Advertising for or accepting new deposits Signup and view all the answers

What is the main focus of a capital adequacy ratio?

Ensuring banks maintain sufficient capital to cover risks Signup and view all the answers

Study Notes

Federal Republic of Nigeria Official Gazette

Gazette number 183, dated November 17th, 2020, Volume 107
Government Notice number 163
Supplement published: Banks and Other Financial Institutions Act, 2020
Pages 651-734

Act Summary

The document is the Banks and Other Financial Institutions Act, 2020
It outlines the functions, powers, and duties of the Central Bank of Nigeria.
It covers the licensing and operation of banks in Nigeria.
This includes minimum share capital requirements, restructuring, and reorganisation of banks.
It further details the duties of banks, including maintaining reserve funds, dividend restriction, and disclosure by directors, managers, and officers.
It covers the issue of banking crisis resolution and related tools.
It discusses specialised banks and other financial institutions, regulations, and resolution tools.
It includes provisions on banking sector resolution fund, contributions, and levies.
The act also includes a special tribunal for the enforcement and recovery of loans.
It contains provisions for the proper operation of books, accounts, and records of banks.
It defines the conditions for granting banking licences.
It specifies offenses and penalties for misconduct, breach of regulations, and lack of compliance with the Act.
It outlines the jurisdiction of the Federal High Court.

Financial Information

Annual subscription for the Gazette: Local - ₦45,000; Overseas - ₦60,500 (Surface Mail), ₦75,000 (Air Mail)
Price per issue: ₦3,000

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Description

Explore the key elements of the Banks and Other Financial Institutions Act, 2020 as outlined in the official gazette of Nigeria. This quiz covers the functions of the Central Bank, licensing requirements, and crisis resolution strategies among other significant regulations. Test your knowledge on the roles, duties, and regulations governing financial institutions in Nigeria.