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RTGS: CBN to stop picking shortfalls for banks

By on September 18, 2013

The Central Bank of Nigeria on Monday said it would, by December 2016, remove its implicit role of ‘lender of last resort’ for the Real Time Gross Settlement System.

The central bank boss, Mr. Lamido Sanusi, said this in Abuja while delivering a keynote address at the international conference on the payment system.

He spoke on the topic, ‘Payment system transformation in Nigeria: Strategic framework, implementation, achievements and challenges.’

The RTGSs are funds transfer systems where the transfer of money or securities takes place from one bank to another without payment transaction being subjected to any waiting period.

The implementation of the RTGSs by central banks throughout the world is driven by the goal of minimising risk in high-value electronic payment settlement systems.

In an RTGS, transactions are settled across accounts held at a central bank on a continuous gross basis. Settlement is immediate, final and irrevocable, while credit risks due to settlement lags are eliminated.

At the event, Sanusi also inaugurated the Payment System Vision 2020 Strategy.

He said the bank’s role in the Deferred Net Settlement systems would be removed by 2019, noting that the CBN would publish all interim steps needed in achieving this long-term objective.

Prior to 2006, the governor said large value payments in Nigeria were settled through a deferred net settlement system.

However, Sanusi said given the defects of the net settlement system and in view of the sensitive nature of wholesale payments, the CBN commenced the operations of the RTGS on December 18, 2006 to increase the efficiency of time-critical payments.

He said with the implementation of the revised  PSV2020, the country would see the emergence of a new collateral management for all the deferred net settlement systems.

The CBN boss said, “The key recommendations in the revised document resulted from identified deficiencies when the existing market infrastructure were assessed against the current 24 Principles for Financial Market Infrastructure.

“It is pertinent to note that the key recommendations resulted from a much higher target for compliance than was possible in 2007 due to the significant progress already achieved.”

 

 

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