CBN Threatens Sanctions on Banks for Clearing System Defaults

Central Bank of Nigeria (CBN) has unveiled sanctions that it suggests should be imposed on banks that flout the rules for clearing financial instruments in the country.

The proposed sanctions are contained in the exposure draft of, “The guidelines for Nigerian clearing system rules, 2016 (revised)” that the apex bank posted on its website.

According to the CBN, a bank will be suspended from participating in clearing activities, if fails to replace within two days, the amount of the clearing collateral for cases where the settlement account is not adequately funded.

It further stated: “Where the collateral so discounted is insufficient the bank shall be suspended forthwith and further measures shall be taken in accordance with the settlement guideline,” adding that the same sanction will apply when a bank overdraws its settlement account maintained with the CBN for three consecutive working days.

The regulator also proposed a similar sanction for a non-settlement bank that persistently overdraws its account with its settlement bank especially where the latter has communicated its intention to stop settling for such a non-settlement bank to the CBN and the Nigerian Interbank Settlement System (NIBSS).

According to the CBN, every suspension will last until it approves that the affected bank should be reinstated.

Other highlights of the exposure draft include the proposal that cheques deposited by the customer at any member bank will be deemed paid at the end of the next working day (T+1) and electronic instruments will also be deemed paid if they had be presented to the clearing system same day and if instruction is received from customer at least two hours before closure of session available for the financial instrument.