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Banks face sanction over non-proprietary assets transfer

By on October 29, 2014

The Central Bank of Nigeria (CBN) said it has resolved to sanction banks that ignored its directive on transfer of non-proprietary assets to licenced custodians.

The CBN stated this in a letter dated October 23, 2014 with reference number “BSD/DIR/GEN/LAB/07/036,” addressed to all banks and discount houses.

The letter titled: “Re: Transfer of all Non-Propriety Assets to Licenced Custodians,” signed by the Director, Banking Supervision, CBN, Mr. ‘Tokunbo Martins, was posted on the CBN’s website.

It noted that the recently concluded Risk Based Examination of banks revealed that some banks have ignored with the directive on transfer of non-proprietary assets to custodians as contained in our circular BSD/DIR/GEN/LAB/07/008 dated March 11, 2014 with impunity.

However, the central bank declined to list the affected banks.
“You will recall that compliance was required no later than 30th April 2014. You will also recall that the sanctions for non-compliance within the stipulated period included possible loss of money market dealership, exclusion of 50 per cent of the financial assets portfolio from the calculation of Liquidity Ratio, as this will be deemed non-proprietary, amongst others.

“In line with the CBNs stance of non-tolerance of regulatory infractions or treating regulatory directives with levity, these banks shall be sanctioned in line with the circular and the provisions of Bank and Other Financial Institutions Act (BOFIA),” it stated.

The CBN further reminded banks to immediately comply with the circular and ensure compliance on an on-going basis, adding that the “compliance at this time will not preclude the CBN from penalising the period of non-compliance.”

The CBN in the earlier circular in March, 2014 had observed with dismay, the apathy by money market operators in appointing custodians as stipulated in the Guidelines for Custodianship in Money Markets and Other Fixed Income Instruments issued in 2007. This it had explained, resulted in the assets of banks and discount houses being comingled with those of their clients/customers.

Consequently, it had explained that the situation made it difficult for it to segregate the assets of banks and discount houses from those of their clients/customers.

 

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