CBN Releases Part of N499bn Credit Penalty to Banks

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  • To issue new guidelines on charges for cashless transactions

Ejiofor Alike and Emma Okonji with agency reports

The Central Bank of Nigeria (CBN) has Released to some banks part of the N499,175,535,097 deducted from 12 banks as additional cash reserves after the affected banks failed to meet a target to provide more credit.

Also determined to remove all bottlenecks that could slow down the speed of penetration of cashless policy, which the CBN introduced since 2010, the apex bank yesterday, said it would soon release new guidelines on cash transaction charges.

The new guideline would exempt micro finance banks, mortgage institutions and some financial institutions from paying bank charges on cash-in and cash-out transactions.

The apex bank had on July 3, 2019, directed banks to maintain a minimum Loan Deposit Ratio (LDR) of 60 per cent by September 30, 2019.
The LDR, which was being reviewed quarterly to improve lending to the real sector, was 58.5 per cent as at May.
It has since been raised to 65 per cent for the last quarter of the year.

But for not meeting the initial 60 per cent target, the apex bank deducted N499.1 billion from 12 major banks as additional reserves.
The 12 affected banks and the amount deduced are: Citibank (N100,743,055, 321); First Bank of Nigeria (N74,668,880,480); FBNQuest Merchant Bank (N2, 697,456,144); First City Monument Bank (FCMB), (N14, 371,064, 742) and Guaranty Trust Bank (N25, 147, 933, 628).

Others are Jaiz Bank (N7, 525, 165,552); Keystone Bank (N4, 162, 938, 879); Rand Merchant Bank (N2, 823,177,399); Standard Chartered Bank (N30,027,137,984); SunTrust Bank (N1,703,205,427); United Bank for Africa (N99,676,181,916) and Zenith Bank (N135,629,337,625).
But the Head of Banking Supervision at the apex bank, Mr. Ahmad Abdullahi, told Bloomberg yesterday that some of the deductions have actually been refunded to the banks.

He, however, did not name the beneficiary banks or how much was returned.

“Most of them that were involved got a refund,” after they met the requirement at the end of September, Abdullahi said.
“It is not a penalty where a bank is to forfeit money,” Abdullahi added.

The Chief Financial Officer of UBA, Mr. Ugochukwu Nwaghodoh, also disclosed that United Bank for Africa Plc was refunded some of the N99.7 billion after it increased lending.

However, the Bankers Committee had clarified that the money deducted by the apex bank from the accounts of 12 banks were neither fines nor levies, adding that the monies would be refunded once the banks met the LDR requirements.

Speaking on behalf of the committee, Chief Executive Officer of Zenith Bank, Mr. Ebenezer Onyeagwu, had stated that the monies would be refunded once the banks met the LDR requirements.

“The CBN never stated that the debits were fines. If you go back to the circular, what it said was that at the cut-off point at the event that you do not meet the threshold, funds will be debited from you and added to your CRR. So, what you have there is not a fine rather is it a levy but it’s just a shortfall based on the parameters that the CBN has set.

“However, even if at the cut-off point of September 26 adopted by CBN, you were short in terms of what you were supposed to do, CBN is not a closed session, it continues. CBN would look at your figures subsequently and where you achieve a loan growth, you have a refund, if you also have a drop in your deposit compared to that cut-off, you will now have debit.”

He said: “So, it’s going to be a continued dynamic process where the whole essence is to see that we don’t just have a one-off growth but a continued process of creating an enabling credit in the system,” he explained.
The apex bank has raised the ratio this month to 65 per cent for a December deadline and said the directive would be reviewed quarterly.

CBN to Issue New Guidelines on Charges for Cashless Transactions

Meanwhile, the apex bank yesterday, said it would soon release new guidelines on cashless transaction charges.
The new guideline would exempt micro finance banks, mortgage institutions and some financial institutions from paying bank charges on cash-in and cash-out transactions.

The Director, Payments Systems Management at the CBN, Mr. Sam Okojere, who made the disclosure in Lagos at the ITEX Agent Banking Innovation Summit, said the new guidelines would be made public by next week.

According to him, “There is need for clarifications on what is payable and what is not payable. Financial institutions that generate accounts for the federal, state and local government are exempted from paying bank charges. Embassies, diplomatic missions, multinational agencies, donor agencies, Ministries, Departments and Agencies (MDAs) of government, mobile money operators are not supposed to pay bank transaction charges and they will be exempted in the new guidelines that will be released next week.”

Okojere explained that CBN has put a lot of innovations into the cashless initiative to ensure that things were done in proper perspective and that all parties involved in providing different forms of services are fairly treated.

“In collaboration with Banker’s Committee, we introduced the shared agent network that will boost agent network in achieving the 500,000 agent points across the country before the end of 2020. CBN has recognised the need for agency banking and had since released regulations around it to ensure financial inclusiveness for all Nigerians.

“CBN has since realised that there has been some forms of misconception about agency banking in terms of what they do and what they are supposed to do. The major role of Super Agents in agency banking, is to aggregate the mobile money operators and provide the platform to manage the agents. But CBN has noticed that some of the Super Agents are already taking over the role of the agents themselves. Some Super Agents now issue virtual wallets, which is contrary to the framework that gave rise to agency banking. They are not supposed to be directly involved in transferring money from foreign countries into Nigeria,” Okojere said.

He however explained that agents were allowed to do cash-in and cash-out transactions and funds transfers in remote areas were banks cannot establish their branches. “To make it easier, a decision was reached that the cost of US Dollar transaction would be bore by the initiator of the transaction,” he further said.

Managing Director, ITEX, Mr. Ernest Uduje, said the essence of the summit was to bring together, key stakeholders in the financial industry space to address some of the challenges militating against CBN’s cashless policy initiative, and to proffer solutions on how best to deepen financial inclusion in the country.

The Chief Executive Officer, Shared Agent Network Expansion Facilities (SANEF), Mrs. Ronke Kuye, who presented the lead speech at the summit, said SANEF was incorporated as a company in January this year, to intervene in the cashless policy initiative to widen and deepen financial access points and services for the purpose of increasing financial inclusion to 80 per cent by the end of 2020.