The Nation Newspaper

Tag: cbn

  • CBN directs issuing banks to fix prepaid cards’ limits

    CBN directs issuing banks to fix prepaid cards’ limits

    The Central Bank of Nigeria (CBN) at the weekend authorised banks to determine the maximum withdrawal and spending limits for prepaid cards.

    Card issuance guidelines issued by the regulator, said limits specified for prepaid cards shall also apply to cards linked to mobile money wallets, where full knowledge of the customer in accordance  with KYC (Know Your Customer) has been performed on the mobile money customer.

    Also, prepaid cards will operate  within the minimum prescribed KYC requirements.

    The CBN also said loadable limits both in naira and foreign currency would be determined by the issuing bank, or financial institution. The banks are also to determine daily balances on the cards.

    “No prepaid card shall be issued beyond the limits of a stored value card to a person, or a corporate organisation. Where a customer desires to do transactions beyond the limits prescribed above, full KYC would be required.

    The apex bank asked banks to refer to the CBN KYC Manual and Money Laundering (Prohibition) Act.

    It said no stored value card shall be issued to a person without obtaining the minimum KYC, while the maximum amount that can be loaded on the stored value card shall not exceed N50,000 per day.

    It said the fee for loading salary payments unto a payment card shall be paid separately by the salary payer and not deducted from the balance value of the stored value card.

    “The maximum balance on the stored value card shall not exceed N250, 000 at any time. The limits specified for stored value cards shall also apply to cards linked to mobile money wallets, where at least KYC (Phone Number and Name) has been performed on the mobile money customer,” it said.

    According to the CBN, a card Issuer should implement system validation to detect potentially suspicious transactions and may refuse to authorise a transaction, or allow the cardholder to make a payment into the card account.

    This, it said, happens where the cardholder has exceeded an account limit, either aggregate or daily limit. Also, where transaction seems unusual, compared with the normal Card usage (such as unusual locations and spending patterns)

    This, can also happen where card issuer reasonably believes that the cardholder has used, obtained, or may use or obtain, a service or money illegally or fraudulently.

    The apex bank explained that a third party may have rights over money in the cardholder account. The transaction originates from a blacklisted merchant, in which case, the Issuer must provide proof of blacklisting to CBN, upon request,” it said.

    For card not present transactions, the minimum of second level authentication for internet based transactions is mandatory. “Issuers are expected to deploy robust fraud monitoring tools that have the capacity to monitor customer transaction trends, real-time operations and option of blocking suspicious transactions. Any trapped card in the ATM shall be rendered unusable (by perforation) by the Acquirer and returned to the Issuer on the next working day,” it said.

     

  • CBN pegs govt’s holdings in discount houses at 10%

    CBN pegs govt’s holdings in discount houses at 10%

    The Central Bank of Nigeria(CBN) has pegged the three tiers of government’s direct holdings in discount houses at 10 per cent.

    The measure is to discourage the Federal, state and local governments from having majority shareholding in those institutions.

    In a guideline issued last weekend, the apex bank said an equity holding of five per cent and above by any investor shall be subject to CBN’s prior approval. Where such shares are acquired through the capital market, the discount house shall apply for a no-objection letter from the CBN immediately after the acquisition.

    The CBN said stakeholders can report their concerns about illegal practices to the institutions’ boards. However, where such concerns border on the activities of the Board, such individuals shall have recourse to the CBN in accordance with Section 3.4 of the provisions of the guidelines.

    The CBN mandated the institutions to show good sense of Corporate Social Responsibility to their customers, workers, host communities, and the public.

    It said the appointment and removal of the Chief Compliance Officer/Head of Internal Audit shall be the responsibility of the Board, subject to CBN’s ratification. The CBN is to be notified of any change and reasons thereof, within 14 days of such change, the rule indicated.

    According to the guidelines, the qualification and experience of the Chief Compliance Officer/Head of Internal Audit shall be in accordance with the provisions of the CBN’s Competency Framework for the Banking Industry.

    Also, the guidelines said the Chief Compliance Officers (CCO) shall, in addition to monitoring compliance with Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) requirements, monitor the implementation of the corporate governance code.

    It said appointment of external auditors shall be approved by the CBN, adding that they  shall render reports to the CBN on banks’ risk management practices, internal controls and level of compliance with regulatory directives.

    Equally, the guidelines indicated, the external auditor shall review the work of the internal auditor on each of the bank’s key risk elements to cover risk identification, measurement, monitoring and control.

    “The key risk elements as specified in the Risk Based Supervision framework are strategic, operational, liquidity, legal, market and credit risks. The external auditor shall review compliance with policies and internal control procedures put in place by the Board to manage and mitigate the institution’s risks.

    “The external auditors,” the rules stated,  “shall report on the level of each key risk element as well as the composite risk profile of the bank, and make recommendations to the Board to enhance the effectiveness of risk management processes in the bank.”

    The CBN said the tenure of auditors in a given bank shall be for a maximum period of 10 cumulative years after which the audit firm shall not be reappointed in the bank until after a period of another 10 consecutive years.

  • Money laundering

    Money laundering

    We need new initiatives to catch up with the criminals

    Mr. Sarah Alade, acting Governor of Central Bank of Nigeria (CBN) said the obvious at a regional course on Combating Money Laundering and other Financial Crimes organised by the West African Institute for Financial and Economic Management(WAIFEM), held in Abuja. She accused banks of complicity in money laundering when she said: “bank facilities are used knowingly and unknowingly to further the act of money laundering, and in most cases to retain the proceeds of such crime.” Her speech that was read at the event by Charles Mordi, director of research of the apex bank is an indictment of banks generally, in the perpetuation of this criminality.

    The enormity of this crime globally could be gleaned where the apex bank’s top woman stated that “over 80 percent of the proceeds of money laundering are associated with banks, one way or the other, all over the world.” We recollect that the United Nations Office on Drugs and Crime (UNODC) in its survey conducted as far back as 2009 to determine the magnitude of illicit funds and to investigate to what extent the funds are laundered declared that criminal proceeds amounting to 3.6 percent of global GDP was reportedly laundered. We wonder what the actual percentage could be in 2014.

    Some of the vicious money laundering activities include proceeds of computer fraud, bribery, round-tripping, drug trafficking, prostitution rings, embezzlement, financial fraud, capital flight, fake cheques, fake currency minting, advanced fee fraud and insiders abuse. These illegal acts, on several occasions, have put banks’ professional integrity and ethical standards on the line. Yet, the destabilising acts have inexorably been on the increase, especially in the country where corrupt public officials launder public funds in collaboration with bank officials.

    Over time, money laundering has become an avenue through which perpetrators try to legitimise ill-gotten gains. It provides a means for controlling such criminal proceeds without attracting attention to the underlying activity or the persons/groups involved. However, such initiative is particularly detrimental to developing economies, including that of Nigeria, with its potential capability for perilous distortions on financial markets and its dampening effects on foreign direct investment (FDI). The act necessitated global scrutiny of all financial transactions, including embarrassingly, the legal ones, because it has become a ruinous catalyst for cross-border illicit asset transfers.

    We recollect that the G-7 summit which held in Paris in 1989 beamed its klieg light on the cankerworm. The summit established the Financial Action Task Force (FATF) on money laundering to co-ordinate international response through the development of 40 recommendations targeted at guiding national governments in their implementation of effective anti-money laundering programmes.

    Nigeria subscribed to those recommendations and we demand to know how far the country has gone in obliterating money laundering in our clime. We know that the act has been criminalised through the Money Laundering (Prohibition) Act, 2011. But how far has the nation gone in the enforcement of her money laundering law through prosecution of infractions and subsequent convictions in courts? More importantly, how effective are the investigative agencies saddled with the responsibility of tracking the crime and to what extent have the agencies been collaborating with their foreign counterparts?

    Nigeria needs a renewed money laundering initiative that would bring law enforcement agencies and financial regulatory authorities and other stakeholders not only in the country but within the West African sub-region together, to discuss and come up with initiatives that would stem the tide. The time to do that is now!

     

  • CBN asks MDAs to deploy e-channels in remittances

    CBN asks MDAs to deploy e-channels in remittances

    THE Central Bank of Nigeria (CBN) has asked Ministries, Departments and Agencies (MDAs) to adopt e-payment channels for their transactions.

    Salaries, pensions and suppliers and taxes are to be paid using the electronic channels.

    The policy applies to organisations with over 50 employees.

    In a circular, the apex bank said the process would reduce time and transaction costs, minimise leakages in government revenue receipts, provide reliable audit sytems, and make it comply with global payment standards.

    The policy is also expected to ensure confidentiality of transactions.

    CBN said, henceforth, payment instructions and associated schedules are no longer to be transmitted to banks by organisations in the public and private sectors through unsecured channels, such as paper-based mandates, flash drives, compact discs, and email attachments.

    The transactions, the bank said, must be routed through bank approved electronic platforms, which transmits the instruction to debit a payer’s account and credit that of a a beneficiary, mobile account, electronic wallet or other electronic channels.

    It will include the ability of a payer to monitor and obtain electronic feedback on the status of any payment, without depending on any third party, manual or semi-manual means.

    Draft guidelines that will ratify the policy have been sent to commercial banks and payment service providers. The exercise is in line with the CBN Act, 2007, Section 47, Sub Section 2(2d).

    It said the policy aligns with the National Payment Systems Vision 2020 (NPSV), which is aimed at ensuring the availability of safe and effective mechanisms for making and receiving various payments from any location and at any time.

    The CBN said all public and private sector organisations, which  relates with employees, pensioners, suppliers, taxpayers and others are considered as stakeholders required working for the success of the policy.

  • CBN retains interest rate at 12%

    CBN retains interest rate at 12%

    The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has unanimously voted to retain the current stance of the Monetary Policy Rate (MPR) at 12 per cent.

    The body also opted to keep the Cash Reserve Ratio (CRR) on public sector deposits at 75 per cent and CRR on private sector deposits at 15 per cent; while also retaining the MPR corridor at +/-200 basis points.

    This disclosure was made on Tuesday by the Acting Governor of the CBN, Dr. Sarah Alade, at the end of the 95th Monetary Policy Committee (MPC) meeting of the apex bank in Abuja.

    Alade also revealed that Nigeria’s gross official external reserves has grown to US$38.30 billion as at May 15 compared to US$37.40 billion at end of March and US$42.85 billion as at  December 2013.

    She noted that the current level of the country’s external reserves could provide approximately nine months of imports cover.

    On the 12 per cent interest rate, the Acting CBN Governor said, “the committee noted with satisfaction Nigeria’s overall domestic economic environment which has remained stable with inflation contained within the target range, the recent stability in the foreign exchange market, stable interbank rates and strong growth outlook.”

    The key challenge for the policy, in the Committee’s view, she added “was that of sustaining and deepening the outcomes of existing policies.

    The key risk factors, according to Dr. Alade, include the high systemic banking system liquidity, elevated security concerns and anticipated high election-related spending in the run-up to the 2015 general elections.

     

     

  • Court rules on Sanusi’s suspension Tuesday

    A Federal High Court in Abuja is expected to give its verdict on Tuesday in the suit filed by the suspended Governor of the Central Bank of Nigeria (CBN), Lamido Sanusi.

    Sanusi ischallenging his suspension by President Goodluck Jonathan.

    Justice Kabriel Kolawole chose Tuesday for judgment after entertaining arguments from parties in the case on April 8. The court took arguments on both the defendants’ preliminary objection and the substantive case.

    Listed with the President as defendants are – the Attorney General of the Federation (AGF) and the Inspector General of Police (IGP).

    Represented by Kola Awodein (SAN), Sanusi’s contention is that the President lacked the powers to unilaterally suspend the Governor of the CBN despite his alleged offence.

    The plaintiff argued that the President’s exercise of the executive powers, provided in the Constitution, was subject to the Act of the National Assembly.

    He said, in his case, the President was expected to exercise his power to remove the CBN governor in accordance with the provision of the CBN Act.

    Sanusi argued that since there is no provision for the suspension of the CBN governor in the CBN Act, it implies that the President has no powers to suspend the apex bank’s governor.

    He further argued that under Section 1(3) of the CBN Act, the bank is made an independent body with the intention of making the bank operationally independent, so that there will not be interference of any sort in its operations, except as permitted under the Act.

    Sanusi contended that even if the President was to exercise control over the bank, which include the suspension of its governor, such must be done with the support of 2/3 majority of the Senate.

    He said his client has made out a proper case for the court to void his suspension.

    In their counter-argument, the defendants insisted that the suspension of the plaintiff by the President was within his powers. They contended that the CBN was an agency of the Executive arm of the Federal Government, whose powers as contained in Section 5 of the Constitution is vested in the President.

     

  • Lagos farmers seek N50m to set up microfinance bank

    Lagos farmers seek N50m to set up microfinance bank

    Fadama III farmers in Lagos are   raising  N50million to establish a microfinance bank, President, Lagos State Apex Fadama Community Association, Alhaji Mufutau Abiodun Oyelekan,  has said.

    The state government is expected to support  the farmers with N25 million.

    Oyelekan  made this known at a workshop on the proposed bank in Lagos.

    According to him, the measure is aimed at sustaining the Fadama III project after it is rounded off in the state.

    With the bank, he said Fadama farmers would get soft loans cheap interest rates.

    He said the Central Bank of Nigeria (CBN) and the Lagos Government were expected to give them the nod to operate the microfinance bank.

    He expressed optimism that the bank will commence operation within the next six months as necessary arrangements had almost been concluded.

    The Permanent Secretary,Lagos State Ministry of Agriculture and Cooperatives Dr. Olajide Bashorun,   lauded the initiative, adding that   it would fill the vacuum,  which will be created as a result of the Fadama  project coming to and end.

    Speaking through the Director, Agric Services, Ministry of Agriculture and Cooperatives, Dr. Olayiwole Onasanya, Bashorun  said the effect of the development would be adequate financial empowerment of the farmers to improve and increase food production.

    State Project Coordinator of Fadama 111,  Foluso Ajijola, said the bank  will   provide  affordable financial services to  farmers.

    Like commercial banks, he said the microfinance institutions will  be  independent and provide loans to small entrepreneurs.

    He said the directors  would be  chosen from the association.

     

  • Unauthorised charges

    Unauthorised charges

    •CBN should sanction banks involved in the unethical conduct

    The threat of unauthorised charges on customers’ accounts by banks might soon be a thing of the past if effort by the Central Bank of Nigeria (CBN) to nip it in the bud is effectively sustained. The apex bank’s consumer protection department, at a recent media parley to mark the consumer financial literacy awareness campaign in Enugu rattled the public with disclosures that it recovered N13 billion illegal charges fleeced from customers’ accounts by commercial banks in the last two years.

    Hajiya Khadijah Kasim who held forth for Umma Aminu Dutse, director of the department during the parley reportedly disclosed that these untoward sharp practices have led to CBN’s introduction of important banking system reforms to stabilise and sanitise the system. One cardinal component of the reforms is the creation of a consumer protection office in the CBN since 2010, and its subsequent upgrade into a full-fledged department in 2012. The department is expected to help CBN promote a sound and stable financial system as enshrined in its Act, by regulating the conduct of financial service providers to ensure that they deal justly and even-handedly with customers.

    Further steps, according to Kasim, have been taken by the apex bank to also engender a bank-friendly environment, including its intervention in ensuring that Commission on Transaction (COT) charges by commercial banks dropped to N2 per thousand naira while plans have been worked out to make sure that it drops to N1 before the year runs out. The goal of the apex bank, according to her, is to achieve zero COT which has been proved to be one of the avenues for shady bank deductions, by 2015.

    Without equivocation, bank customers in the country need more of consumer financial literacy awareness campaign that would create a public engagement platform for the apex bank to get important feedbacks and also create awareness and promote financial literacy among bank customers. The current enlightenment campaign is important and should be spread across the country because it will imbue bank customers with the requisite knowledge, skills and confidence to make informed choices and take effective actions that will enhance their financial and economic well-being.

    In recent times, the avoidable turmoil in the financial sector of the economy has waned public confidence in banks. And now that the sector is gradually picking up, the idea of consumer protection through a serious beaming of regulatory searchlights on illicit banking activities against customers’ accounts is a move in the right direction. For banks to survive, they need public trust and confidence in their activities. But to achieve this goal, banks also need to be honest in dealings with customers which is currently lacking, especially in view of the scandalous discovery of illegal bank charges on unwary customers’ accounts.

    But the discovery of such corporate theft by banks should not be swept under the carpet. There should be specific sanctions if only to serve as deterrence to others contemplating such unethical act. In our view, those banks caught in the act of this corporate theft should be severely punished for they ought not to have made the deductions, without customers’ notice, in the first place. Their unethical acts constitute a flouting of CBN guidelines which might be the reason behind declarations of outlandish and unreal banking profits by some banks in the country.

    Henceforth, bank inspectors should be more vigilant because, unlike what obtains in better managed climes, banks in the country have consistently shown no respect  for the significant principle of uberimei fidei (utmost good faith) that should exist between them and their customers. This sharp practice should not rear its head again because it is antithetical to economic growth and development.

  • CBN insists on OMO for liquidity management

    CBN insists on OMO for liquidity management

    The Central Bank of Nigeria (CBN)  has said it will continue to rely on Open Market Operations (OMO) auctions as the major tool to control liquidity in the system.

    The OMO entails the buying and selling of government’s securities in the open market to expand or contract the amount of money in  circulation.

    In a circular, the CBN said the OMO will be discretionary and will involve the sale or purchase of Treasury Bills and CBN Bills through the market that would include auctions and two-way quote trading, adding that the securities will be of specified tenor and volume, linked to assessed liquidity conditions in the banking system.

    Participants at OMO auctions would be the authorised Money Market Dealers (MMDs) comprising commercial and merchant banks, non-interest financial institutions and discount houses.

    Also, based on market liquidity conditions and the subsisting Monetary Policy Rate (MPR), OMO will be complemented by repurchase agreements (repo/reverse repo), at the applicable rates.

    The CBN said commercial and merchant banks will continue to maintain a minimum Liquidity Ratio (LR) of between 20 and 30 per cent. Discount houses will continue to invest at least 60 per cent of their total borrowings in government securities while the ratio of individual bank loans to deposits was retained at 80 per cent.

    It said the discount window at the CBN would remain available to give authorised dealers access to effective management of their temporary liquidity shortages or surpluses. Thus, standing facilities would continue to be open to them on overnight basis in line with subsisting guidelines. The facilities would be in the form of Standing Lending Facility (SLF) to address temporary shortfalls in liquidity, and Standing Deposit Facility (SDF) to aid effective management of short-term liquidity surpluses.

    The CBN said it will determine the applicable interest rates on the facilities and allow rediscounting of eligible securities at the discount window at its rates.

    The CBN said it would continue to adopt the risk-based supervision (RBS) approach in the supervision of institutions under its regulatory purview.

    “The objective of the RBS approach is to provide an effective process to assess the safety and soundness of banks and other financial institutions.This is achieved by evaluating their risk profile, financial condition, risk management practices and compliance with applicable laws and regulations,” it explained.

    It enjoined banks to pursue profitability in their business models through efficient operations, adding that they should charge competitive rather than excessive rates of interest in the course of their transactions. The lenders are also expected to disclose their prime and maximum lending rates as fixed spreads over the MPR.

  • CBN and dirty notes

    SIR: One of  the core functions of the Central Bank of Nigeria (CBN) is issuance of legal tender currency for the nation. A  time was when it discharged that function creditably with what was then the clean notes policy whereby once notes went into circulation and came back through the banks, they were sorted into clean and dirty  notes.

    The clean notes went back into circulation, while the dirty ones were destroyed. The bank had a note processing process for ensuring the successful implementation of this policy and bore the entire cost!

    I was therefore amazed to read in the papers that licensed banks are now being asked to do this sorting or pay a penalty for not doing so!

    This has resulted in the stinking, ragged notes we are now being saddled with and the racket of our currency notes being hawked like ‘akara’ at parties and motor garrages, with banks’ cash managers smiling to the bank.

    The CBN should put a stop to this mess by ensuring that it resumes its mandate of supplying the needed notes without burdening the licensed banks. The CBN is not a profit making organisation, which is why its enabling act only talks of operating surplus, NOT,profit

    It should not therefore shirk the responsibility to commit funds to fulfill this function.

    As for the currency hawkers, they remain in business because some people are foolish enough to throw their money away because they want to make a show. If one must present an individual with a gift, why not put the amount in an envelop to give the person rather than pay as much as N200 per N1000 to procure mint-fresh notes?

    • Abiodun Sopitan

    Oregun, Lagos