The Central Bank of Nigeria (CBN) has made it compulsory for all current and intending settlement banks in the country to have treasury bills valued at ₦15 billion, which will be used as collateral for their settlement roles.
This was disclosed in the apex bank’s recently published Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for Fiscal Years 2018/2019.
In addition to the ₦15 billion collateral requirement, prospective settlement banks will also be required to be capable of providing agency facility to other banks, clear on their behalf, and have enough branches across locations where the CBN is currently located. The compulsory collateral of ₦15 billion will be subject to periodic reviews.
Any bank applying for direct participation as a settlement bank shall be required to possess the capacity to provide the required clearing collateral of N15 billion, subject to periodic review. It shall have the ability to offer agency facilities to other banks and to clear and settle on their behalf. It shall also have an adequate branch network, in all the CBN locations.
The apex bank further stated that it would keep categorising banks into settlement and non-settlement banks, such that settlement banks would be those who are directly involved in the clearing houses, while the non-settlement banks who will not.
Banks that meet the specified criteria shall continue to be designated as “Settlement Banks.” Consequently, non-settlement banks, called “Clearing Banks” shall continue to carry out clearing operations through the settlement banks under agency arrangement. The terms of agency arrangements shall be mutually agreed between the Settlement Banks and the Clearing Banks.
Meanwhile, the CBN also restated its commitment to keep using the risk-based supervision (RBS) method for all regulatory purposes. This is with the objective of providing effective assessment of the safety and soundness of financial institutions in the country. The risk-based supervision method for banks “is achieved by evaluating their risk profile, financial condition, risk management practices and compliance with applicable laws and regulations.”
On a final note, the CBN directive required banks to seek profitability, albeit legally. It also enjoined banks to desist from charging excessive rates. In the same vein, lenders are to formulate the habit of publicly declaring their prime and maximum rates for lending.
ugodre,i am not one fond of complaint,but I am going to complain.i thought Godwin (my main man) did start this open market operation (OMO) and is this guidline by the cbn part of the omo.if they started this omo,it will push the economy by at least 2%,paving way for cut in public bank interest.
The Cbn did cut pbi by 1% about a year ago,but inflation did jump,and the cbn did restore to status quo.to me,it means the economy is capable of growing more than it would even in this recession.maybe with the decreasing in inflation,and with this omo,it is possible at the next monetary meeting cut in PBI.
I thought I saw it last week in nairametric,no Nigerian media company pick this news,as this is a major and creative intiative move by this govt,since they took over,as they keep blaming past govt.this omo will remove this fear of increases in inflation by the cbn.
Can you bring this up again,please,i abeg you.in this news report,it also said railway from lagos to Ibadan to be done before the end of this year,construction to be done by the chinese