The Central Bank of Nigeria (CBN) has directed that settlement banks provide clearing collateral of not less than N15 billion worth of treasury bills to enable them to perform settlement roles.
This was contained in the CBN’s Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for the fiscal years 2018/2019.
The CBN said it would continue to categorise banks into two – settlement and non-settlement banks – for clearing and settlement. Settlement banks participate in the clearing houses and receive their net clearing position in their settlement account with the CBN. Non-settlement banks receive their net clearing position through the settlement account of their settlement bank.
“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 adequate branch network in all the CBN locations,” the CBN said.
“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 through the settlement banks under agency arrangement.
‘’The terms of agency arrangements shall be mutually agreed between the Settlement Banks and the clearing banks,” the CBN said.
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 said.
It urged banks to pursue profitability in their business models through efficient operations, adding that they should charge competitive rather than excessive rates of interest in their transactions. The lenders are also to disclose their prime and maximum lending rates as fixed spreads over the Monetary Policy Rate.