Why Banks Disobey CBN Guidelines

By Godson Ikoro

The recent sanction of nine commercial banks for failing to comply with its cash circulation guidelines and another 10 banks for breaching foreign exchange guidelines and other offenses have drawn thunderous plaudits of bank customers.

The banking public said that it serves the erring banks right, particularly for the avoidable suffering the banks subjected them to during the yuletide .
While the bank customers propose a big toast to Governor Olayemi Cardoso ‘s leadership of the Central Bank,they wished that the regulator should increase the punitive measures so as to serve as a commensurate deterrent to others.While they proposed a total review of the punitive measures they urged the Cardoso led CBN to do more to check how the banks consistently short change customers.

Revolnews check last week showed that the offense of the sanctioned banks call to question their adherence to market discipline and integrity of Basel lll.
The CBN had on February 2, 2024, issued a letter to all banks on the cash reserve requirement framework implementation guidelines, informing banks that the CBN will be ceasing the daily debit on the cash reserve requirement and will adopt an updated mechanism for effective planning and monitoring.
It was by this updated mechanism, that it was able to trap the Nine Banks .
What drew the ire of the Central Bank was that despite the huge sum of cash allocated to these banks, they failed to load their ATM machines in deference to making deals with point of sale operators far and above the daily operating limits .

They failed the basic principles of customer service by being unfriendly, showing lack of empathy and responsive to customers .
A certain bank located along Old Ojo road near mazzamazza area of Lagos could not provide the needed cash they required to travel to the east for burial of their beloved father.Reason:the cash is scarce, the bank told them. But an aggrieved customer accused the bank manager frontally that they have sold the cash to PoS agent. “How can a whole bank not have N500,000 while the PoS operators directly opposite the bank can pay the customer at a higher charge of N20,000?
Before the yuletide, the PoS, charges N100 to pay N5000. By mid December they had started charging N200 for every N5000. So to withdraw N100,000, the customer is made to cough out N4000. This certainly heated up the system and rocked stability.

Ordinarily, the customers would have paid less than N1000. But when they give it to PoS operators, it is negotiated.
The trust, loyalty and friendliness with customers were thrown to the dogs?Banks prefer the PoS transactions to reduce the risk and cost of cash, reduce the amount of circulation among others.
Although the Central Bank of Nigeria,(CBN) has been driving the adoption of PoS systems across the country as of its cashless policy, governor Cardoso has been asked check excessive Charges.
Another Stock broker said that the enforcement of the sanctions have shown that Nigeria has good laws but the lack of enforcement of portray the system across sectors as a lawless.
The sanctions which came after repeated warnings showed that the management of the affected banks have buccaneers mindsets, a penchance for unscrupulous adventurism in business. Very impeccable sources said that these banks presumptuously commit the infraction because the gains is greater than the fines.
Revolnews gathered that the top ranking banks are the culprit. According to source, they deliberately disobey the rules or guidelines because the fines are infinitesimal compared to the gains from disobedience. According to them, this cowboys or young Turks attitude which pavaded the early 20s is still festering.
Argues Mazi Nnanna, private investor in the capital market: “There are clear laws against round tripping for instance. The banks knew it but the gains they make from round tripping makes them to damn the regulator’s fine . Some of these banks which were penalized had their roots in the early 20s. And they were penalized for similar offences as far back as the 20s. Some were banned from participating in foreign exchange markets for upwards of six months” he said.
It would be recalled that
the United States Secret Service, New York Field Office, once seized over $5.3 million from a correspondent account for a bank headquartered in Nigeria. Investigative leads derived from Bank Secrecy Act data determined that this account was actually owned by the Nigerian bank and operated by the bank’s president and chairman of the board of directors. Information obtained from a review of Bank Secrecy Act filings determined that this bank was operating a highly sophisticated hedging scheme called “round-tripping.” The elaborate scheme involved offshore bank accounts and included the use of International Business Corporations.

The central Bank has been fining banks for all manners of infractions yet they are not deterred .There is hardly any bank without one fine or the other. The yearly returns of banks are often followed by queries and fines. The erring banks quickly pay the fines from the proceeds of the intentional breach to declare huge profits every year.