CBN now requires commercial banks to pledge ₦1 billion each for OTC

The Central Bank of Nigeria (CBN) has directed all Deposit Money Banks in the country to commit to a  ₦1 billion collateral each in order to qualify to partake in over the counter trade deals. The collateral comes in the form of government securities.

The apex bank had communicated this development through a circular signed by its Director of Financial Markets Department, Mr Alvan Ikoku. According to the circular, the policy is aimed at ensuring enhanced “efficiency in trading and post-trade activities and build”, as well as ensure confidence in the sector

The directive, which becomes effective as at today June 1st, is compulsory to all Deposit Money Banks (DMBs) with intentions to participate in over the counter trade settlements.

Deposit Money Banks would be disqualified/excluded from the market by the apex bank should they fail to “top-up a pledge” as at when it is required of them to do so.

The Central Bank of Nigeria (CBN), in an effort to enhance efficiency in trading and post-trade activities and build confidence in the financial markets, hereby directs all Deposit Money Banks (DMBs) to pledge collateral of ₦1 billion (one billion naira) worth of Government/CBN securities for OTC trade settlement. -CBN

Note that Deposit Money Banks, according to the CBN, are financial institutions in the country with licenses “to mobilize deposits from the surplus unit and channel the funds through loans to the deficit unit and performs other financial services activities.” Examples of DMBs are: Diamond Bank Plc, Access Bank Plc, Sterling Bank Plc, Unity Bank Plc, and Wema Bank Plc, etc.