• Thursday, February 29, 2024
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BusinessDay

Concerned Banks Stakeholders want CBN to review COT

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The stakeholders, under the aegis of Concerned Banks Stakeholders (CBS), an advocacy group committed to ensuring that banks perform well while satisfying their customers, have called on the Central Bank of Nigeria (CBN) to review its policy on   Commission on Turnover (COT) charges given  the  prevailing headwinds in the financial sector and economy in general  that are affecting the performance of banks and companies.

As part of efforts to reduce banking transaction costs, the CBN in 2013, announced plans to gradually phase out the COT charges on current accounts by 2016. Specifically, it directed all banks to reduce COT from a rate of N3 per mile (N1,000) to N2 in 2014, N1 in 2015 and to a zero charge by 2016. Besides, In addition, the  banks will not charge COT on returned outward clearing cheques, reversal of transactions and all bank-induced debts.

While some banks have been complying with the directive, others have not and considering the fact banks have been under significant revenue pressure as a results of recent cash reserve requirement regime, some stakeholders have called on the CBN to review the policy by ensuring total compliance by all the banks.

According to, Jonathan Chikezie, Chairman of CBS “Investigations showed that a few banks, have been religiously   complying with the guidelines while others are  flouting the provisions subtly. Specifically, from our investigationwhereas some banks are charging the prescribed COT on all transactions, others are still charging up to N4 per N1, 000 account turnover. This is  four times higher than the currently prescribed minimum of N1.“

He said banks have been under significant revenue pressure as a result of the punitive cash reserve requirement regime, noting  that compliance with the N1 and eventually zero COT is likely to see further deterioration in the performance of banks.

“Many banks see COT as an essential cost recovery mechanism for the branch network and related infrastructure provided for servicing customers. This might explain the unwillingness to comply.  This is why  the CBN needs to take a position on whether these guidelines still hold. If so, they should be enforced. The apex bank should take firm action because it is not fair for some banks to be complying while others do not,” he said.

The original document, the ‘Guide to Bank Charges’, which was first issued in 2004, provided a standard for the application of charges in the banking industry and minimised conflicts between banks and their customers.

Overtime, however, it was observed that the various charges in the guide had become obsolete and out of tune with realities in the money market. For instance, some of the provisions/terms in it allowed room for ambiguity and conflict.

In order to reflect current developments in the market and address some perceived flaws, clarify ambiguous provisions and reflect the intentions of the old Guide, the CBN later conducted a review of the  consultation with all the banks, discount houses, Bankers’ Committee, financial experts/consultants. This led to revised Guide which was subsequently issued as a regulation on applicable charges on banking services and products offered to customers.

Banks and discount houses are obliged to ensure compliance with the provisions of the guide. To date, there has been varied compliance within the banking sector, hence the call by CBS for CBN to act fast.