PSBs to retain 75% deposit liabilities in government securities

Payment Service Banks (PSBs), are to maintain at least 75 percent of their deposit liabilities in the Central Bank of Nigeria (CBN) securities, Treasury Bills (TBs), and other short-term Federal Government debt instruments at any point in time.

The Apex bank said this in the revised guidelines for the licensing and regulation of PSBs in Nigeria. Director, Financial Policy and Regulation Department, CBN, Kevin Amugo, in a circular to PSBs, dated August 27, 2020, informed all shareholders that the guidelines have been reviewed and updated in response to market developments since its first issuance in October 26, 2018.

PSBs are expected to leverage mobile and digital channels to enhance financial inclusion and stimulate economic activities at the grassroots through the provision of financial services.

Consequently, PSBs are envisioned to facilitate high-volume, low-value transactions in remittance services, micro-savings, and withdrawal services in a secured technology-driven environment to further deepen financial inclusion, and help in attaining the policy objective of 20 percent exclusion rate by 2020.

The Guidelines is issued pursuant to powers conferred on the CBN Governor by the CBN Act 2007, and BOFIA 1991 (as amended). It covers the definition; objectives; eligible promoters; licensing requirements; corporate governance; business conduct; and permissible activities. The requirements for prudential regulation; supervision; Know Your Customer (KYC); consumer protection as well as risk management of the proposed PSBs in Nigeria.

The guidelines allow PSBs to accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme. They are to carry out payments and remittances (including inbound cross-border personal remittances) services through various channels within Nigeria; and sale of foreign currencies realised from inbound cross-border personal remittances to authorized foreign exchange dealers; among other permissible roles.

The minimum capital requirement, application and licensing fees for PSBs are minimum capital N5 billion, non-refundable application fee of N500,000, non-refundable licensing fee N2 million, and change of name fee of N1 million.

According to the guidelines, the capital adequacy ratio (CAR) of a PSB shall be measured as the percentage of its shareholders’ funds unimpaired by losses to its total risk weighted assets. The minimum CAR (Qualifying Capital/Total Risk Weighted Assets) for PSBs shall be 10 per cent or as may be prescribed by the CBN from time to time. Capital measurement approach for PSBs shall be as applicable to Deposit Money Banks (DMBs) or as may be prescribed by the CBN from time to time.