CBN to open innovative space for financial services providers

– May punish banks over arbitrage

The Central Bank of Nigeria (CBN), yesterday promised to ensure that its regulatory activities create room for high and broader innovation in the banking industry’ especially with the increasing venture of fintech’s in the financial services industry.

The apex bank also said it was open to all organisations that are willing and want to play in the financial services industry without stifling innovation

Speaking at the on-going IMF/World Bank meetings, CBN,Deputy Governor, Financial Systems Stability Directorate, Mrs. Aishah N, Ahmad told an audience that the issue of cybersecurity was important for not only business risk but also regulatory risk.

Aisha said it was pertinent that the apex bank focused on resilience of security because of its potential to disrupt IT operations.

Cyber security or information technology security, experts say, are the techniques of protecting computers, networks, programmes and data from unauthorized access or attacks that are aimed at exploitation… Network security includes activities to protect the usability, reliability, integrity and safety of the network.

Cyber security became necessary because of the increasing level of internet fraud in the world.The fact that one can now open a bank account, save, borrow, invest and transfer money over the internet without visiting a bank provokes the need for cyber security.

As growth in FinTech industry continues to assume significant stature, regulators such as the Central Bank of Nigeria and the Securities and Exchange Commission are currently exploring ways of regulating FinTech companies operating in Nigeria.

‘’We had some of these guidelines and frameworks in place, it’s about strengthening them and identifying where you need to improve layout regulations so that they are fit for purpose,” she said.

The way fintechs are disrupting the Nigerian financial space, a lot of it has come from the payment space. So you see them more active in the space for receipts where they are already getting licenses from us.
‘’We’ve seen disruptions in the savings space and disruptions in the micro-lending space so these are not organisations that the CBN is not aware of but broadly speaking, our continuum shall be to identify these organisations and that is why we are trying to finalise the incubation of some of these companies.

‘’So those we need to identify and watch what they are doing, those we need to refine our regulatory framework for because right now, it is skewed to banks and the payment service companies but right now we have other companies emerging that do not quite fit into that space. We are also looking at moving from regulation by identification but more around regulating their activity.

‘’So if you are not a bank, you cannot get a banking license but if you operate as a bank then we have to regulate. We are looking a lot at ensuring professionalism as well in what we do in terms of regulation. We don’t want to stifle innovation so we want more companies to come up and assist because Fintechs do a lot for furthering financial inclusion objective. The Central Bank is working very hard in that respect and we are open to all organisations that are willing to come on board’’.

Meanwhile, the the bank has also vowed to use the big stick against banks and their customers over shady deals intended to game the loan to deposit ratio (LDR) policy.

The banking regulatory authority initially set the LDR at 60 per cent before raising it to 65 per cent with a December 2019 deadline.

While this has led to lower lending rates, some banks are now giving loans to customers who go on to buy treasury bills (TBs) and other securities at CBN’s open market operations (OMO), thereby earning a margin considered as arbitrage — taking advantage of rate differentials in the markets.

There are also those who take intervention loans for agriculture and industry from the Bank of Industry at 7 per cent and then invest in TBs and CBN’s OMO at 14 per cent — making a profit of seven percentage points without putting the funds in the sectors they were meant for.