Nigerian banks get 30 days to refund excess CoT charges

Central-Bank-of-Nigeria-CBN14 June 2014, Lagos – Nearly 15 months after it issued a ‘Guide to Bank Charges’ on March 27, 2013, the Central Bank of Nigeria, CBN, on Thursday lamented a situation where some banks continue to fleece their customers through excess Commission on Turnover (CoT).

In a circular dated June 11, 2014 and titled, ‘Implementation of the revised guideline to bank charges- Commissions on Turnover’, referenced FPR/DIR/GEN/CIR/01/008, the CBN said information at its disposal indicates that some banks continue charge CoT at the rate of N3 per mile, which was the agreed rate for 2013.

The circular reminded all banks that the maximum CoT for 2014 as contained in the guide jointly agreed between the CBN and the Bankers Committee (comprising chief executives of all banks, among others) remains N2 per mile.

It, therefore, directed all banks that have charged customers in excess of the agreed CoT since March 27, 2013 “to refund same to the affected customers, not later than 30 days from (June 11, 2014)”.

The CBN noted that the guide was part of efforts to standardise charges for various products and services offered by banks in the country, lamenting a situation where the banks have continued to abuse the portion that says that CoT is negotiable.

It reminded all that the document specified that such charges must not go beyond the maximum of N3 per mile in 2013, N2 in 2014, N1 next year and zero CoT by 2016.

The circular, signed by Franklin Ahonkhai for CBN’s Director of Financial Policy and Regulation Department, did not, however, say what would happen to those that fail to refund such excess charges.

But it also said the CBN’s attention has been drawn to the practice where some banks charge fees that are alien to the guide.

“For example, some banks offer accounts that are supposedly CoT-free, but impose a maintenance or similar fee, (which is) not covered by the guide.”

It further noted that although Paragraph 4 of the guide says that charges on products and services are not exhaustive, it, however, requires banks wishing to levy charges outside the guide to obtain prior approval of the CBN.

As such, the CBN ordered banks that have charged customers maintenance fees (or any fee for that matter) that was neither covered by the guide nor has been prior-approved by the CBN “to refund the fee to the customers not later than 30 days from the date of this circular”.

A report earlier in the year by Renaissance Capital had noted the impact of tougher regulation, following which Nigerian banks are facing serious challenges, particular to delivering returns above 20 per cent of their cost of capital, compared with their peers in sub-Saharan Africa.

In the report entitled, ‘Nigerian banks: The impact of tougher regulation’, Rencap noted “that commission-on-turnover (CoT) fees were fairly significant contributors to non-interest revenue (NIR) in full-year 2012, especially for the larger banks.

“At full-year 2012, commission on turnover contributed 40 per cent to Non-Interest Revenue for Zenith and First Banks, and 12 and 10 per cent to total income, respectively.

“The least affected of the Tier 1s in full year 2012 was Access at 14 per cent of NIR and 5 per cent of total income.

“Of the Tier 2 banks, Diamond, First City Monument Bank (FCMB) and Skye were the most affected, while Stanbic IBTC and Fidelity were the least,” Rencap added.

Another tough regulation, the report noted, was “the increase in the public-sector CRR to 50 per cent (currently 75 per cent) will reduce interest income for the banks by (between) one and six per cent annually.

This, the report said, is significant, considering the fact that most of them have exposure to public sector funds in the 10 to 16 per cent range.

This may therefore explain, keen watchers of events in the sector believe, why some banks continue to fleece their customers through the back door.
*Kingsley Ighomwenghian-Daily Independent

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