How to Start a Commercial Bank

Commercial banks offer financial services such as business loans and deposits. Other services include basic investment products to the general public and companies.
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.
commercial bank
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.
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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. 
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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.


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