CBN expands financial inclusion, with the PSB supervisory guidelines

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The Central Bank of Nigeria (CBN) has issued a supervisory framework for payment service banks (PSBs) in order to streamline operations and increase financial inclusion.
The document, which was released yesterday, is a follow-up to the licensing and regulation blueprint, which was released in 2018 and revised the previous year.

The document discusses market structure, permissible/illegal activities, ownership/licensing, corporate governance, shared services, and sanctions.

 

“This framework hereby provides a set of regulations aimed at streamlining payment service bank operations, ensuring transparency in their operations, and ensuring adequate customer protection.”

“The framework focuses on corporate governance, risk management for PSBs, and the safety of funds for payment service bank customers. According to the document, “this framework also aims to ensure that sound risk management practices are embedded in the operations of payment service banks.”

The apex bank stated that PSBs would be required to follow existing regulations, prudential guidelines, and circulars issued on a regular basis.

Through the framework, the regulator has mandated operators to deploy at least 25% of their services to rural areas as defined by the regulatory body from time to time, as well as other under-banked areas. PSBs will also be required to install automated teller machines (ATMs) and point-of-sale (POS) centers in the affected areas.

Because their services are technology-driven, it has also compelled the operators to follow best practices in data storage, security, and integrity.

According to the template, operators of PSBs are prohibited from, among other things, granting loans/advances/guarantees, accepting foreign currency deposits, underwriting risks, and establishing any subsidiary except as prescribed in the CBN Regulation on the Scope of Banking and Ancillary Matters.

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The bank also specified the qualifications and process for appointing board members and top management personnel in order to “ensure sound corporate governance culture,” adding that provisions of the Company and Allied Matters Act (2019) would apply.

“An annual appraisal of the board, its committees, chairman, and individual directors shall be conducted, covering all aspects of the board’s structure, composition, responsibilities, processes, and relationships, or as prescribed by the CBN from time to time.” An Independent Consultant with sufficient experience, knowledge, and competence will conduct the Board appraisal. The annual Board appraisal report must be forwarded to the CBN by March 31st following the end of each fiscal year and presented to shareholders at the AGM,” it stated.

It began with the requirement to know your customer (KYC): “A PSB shall identify and take reasonable steps to verify the identity of a beneficial-owner, using relevant information or data obtained from a reliable source to satisfy it that it knows who the beneficial-owner is.”

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