Central Bank of Nigeria has released a proposal frame work of setting up a private Asset Management Company in Nigeria. The framework which is seeking input from stakeholders when operational will see private companies who meet the requirement setting up vehicles to buy and manage non performing loans in Banks.
CBN in a circular reference No FPR/DIR/GEN/CIR/06/021 signed by the apex’s Bank Director of Financial Policy and Regulation Department, Mr Kevin Amugo and entitled: “Exposure draft of the framework for licensing, regulation, and supervision of Private Asset Management Companies in Nigeria” said that the companies to be set up under this arrangement will be known as Private Asset Management Companies (PAMC), and will be private sector funded and managed.
The CBN circular noted that: “The dynamic developments in the management of risk assets in the Nigerian banking system necessitated the establishment of the Asset Management Company of Nigeria, AMCON, in 2010.” The prime objective of AMCON was to manage the toxic assets of the system, which was exacerbated by the global financial crisis.”
“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 non-performing loans through the establishment of Private Asset Management Companies, PAMCs. This is in line with CBN’s core mandate for promoting a sound and stable financial system.”
PAMC is proposed to have a minimum capital base of N10 billion, which would allow it to purchase some of the non-performing loans (bad debts) from banks and other financial institutions in the country. Promoters are to write to the CBN with a non refundable N500,000 deposit and evidence that they have a deposit of N10 billion which the apex bank circular says would be the minimum capital requirement for setting up such private asset management company.
According to the circular the major functions of the PAMC as stated are buying off non-performing and performing loans off banks and other financial institutions and disposing of them and providing consultancy and advisory services to banks and other financial institutions for the purpose of restructuring receivables and other assets including the sale of such assets to third parties.
However, such private asset management companies will not be allowed to operate as banks just like AMCON.
