The Central Bank of Nigeria on 15 March, 2022, released an exposure draft on guidelines for Bank Neutral Cash Hubs (BNCH) operations in Nigeria. This is in furtherance of its mandate to promote a sound financial system in Nigeria. In collaboration with Banker’s Committee, the Central Bank of Nigeria initiated the Nigerian Cash Management System (NCMS) which seeks to reduce cost and improve operational efficiency in the country’s cash management value chain.
Cash is a completely critical and touchy object for everyday bank transaction. Internal check, supervision, and tracking at extraordinary levels of cash handing are vital to prevent the incidents of thefts, fraud, forgeries, embezzlement, and shortfall of cash. Adherence to the set rules and method is essential. Proper maintenance and handling of cash play a crucial function in the smooth functioning of the Bank.
The introduction of Bank Neutral Cash Hubs (BNCH) is to reduce the risks and costs borne by banks, merchants, and huge cash handlers in the course of cash management activities; deepen financial inclusion, and leverage on shared services to enhance cash management efficiency.
Premised on the above, this article highlights the minimum standards and requirements for the registration and operations of Bank Neutral Cash Hubs (BNCH) in Nigeria per the released draft guidelines.
MEANING OF BANK NEUTRAL CASH HUBS (BNCH)
Bank Neutral Cash Hubs (BNCH): BNCHs are cash collection centers to be established by registered processing companies or Deposit Money Banks (DMBs) based on business needs. According to the guidelines, they are to be located in areas with high volumes of commercial activities and cash transactions. The hubs are to provide a platform for customers to make cash deposits and receive value irrespective of the bank with which their account is domiciled.
ELIGIBLE PROMOTERS OF BANK NEUTRAL CASH HUBS
Entities permitted to operate and apply for registration of a BNCH are called eligible promoters. There are two eligible promoters in the operation of the Bank Neutral Cash Hubs namely;Deposit Money Banks (DMBs) and Cash Processing Companies (CPCs). The import of this is that Deposit money banks (DMBs) and processing companies in the financial industry have been given the go-ahead to establish deposit and withdrawal centres outside the banking hall across the country.
It should be noted that a BNCH is permitted to carry out the following:
- Receipt of Naira denominated deposits on behalf of financial institutions from individuals and businesses with high volumes of cash.
- High volume cash disbursement to members of the public on behalf of financial institutions.
- Any other activities that may be permitted by the CBN.
REQUIREMENTS FOR REGISTRATION OF AN ELIGIBLE PROMOTER
The guidelines require eligible promoters seeking to register to operate a BCHN to meet certain requirements. The promoters must submit a formal application to the Director, Currency Operations Department (COD) requesting to be approved to operate a BNCH.
The application for registration is processed in two stages, namely:
- Approval-in-Principle (AIP): At this stage, prospective promoters of BNCH (CPC or DMB) seeking to operate a BNCH will be required to submit a formal application to the Director, Currency Operations Department (COD) with the required documents such as;
- A valid DMB license or a valid proof of CPC registration issued by the CBN;
- A non-refundable application fee of N100,000 only, or such other amount as the CBN may specify, in a bank draft payable to the CBN;
- Evidence of board resolution approving the application duly signed by the Chairman and Secretary of the board of the CPC or the DMB;
- Detailed business plan or feasibility report which shall, at a minimum include; objectives of the BNCH; services to be rendered by the BNCH; justification for the application; organizational structure, showing functional units, responsibilities, reporting relationships; list of proposed staff in charge of BNCH operations/services and technical Services Agreement (where applicable); and
- Certificate of Incorporation and certified true copies of other incorporation documents of the CPC or the DMB;
- Detailed Manuals and Policies, including but not limited to; operations manual, dispute resolution protocols, whistle-blowing policy; Enterprise Risk Management (ERM) Framework and Code of Business Ethics and Conduct.
The CBN will issue a no objection to the promoters of the BNCH following the receipt of an application with complete and satisfactory documentation. In all cases, the CBN shall communicate its decision to the promoters within thirty (30) days of receipt of the application.
- Final Approval: The guideline provides that upon the issuance of no objection to the application and before the grant of Final Approval to operate as BNCH, the promoters are required to submit the following:
- Evidence of the location of office (rented or owned) for the takeoff of the business;
- Evidence of ability to meet technical requirements and provision of modern infrastructural facilities such as office equipment, computers, telecommunications, to perform the BNCH’s operations and meet CBN and other regulatory requirements;
- Evidence of insurance to cover hub vault cash.
- Evidence of collaboration with the Nigeria Police Force (NPF).
- A facility with; adequate office space for day-to-day operations; a secure mini vault for storage of cash; basic security infrastructures such as 24/7 electronic CCTV surveillance, access control, and monitoring, etc by appropriate security personnel.
- Secure connectivity with the Nigerian Interbank Settlement System (NIBSS) who must provide interoperability amongst DMBs to establish a platform for customers at the BNCHs to receive same-day value for their deposits.
- Provision of Service Level Agreement between Currency Processing Company and Deposit Money Bank, for the extension of clearing, settlement, and indirect connectivity with NIBSS.
- Internal Control Policy;
- Business Continuity Plan;
- Comprehensive plan on the commencement of the BNCH’s operations with milestones and timelines; and
- Evidence of staff training program.
- Evidence of insurance of total deposits
Apart from the aforementioned registration requirements, an eligible promoter must prove to be satisfactory before being registered by CBN. These satisfactory requirements are highlighted below:
- Financial Requirements
The draft guidelines stipulate that the financial requirements for an approval to operate as BNCH, which may be amended by the CBN as it deems necessary, are as follows:
- Non-refundable application fee of one hundred thousand Naira (N100,000); and
- Non-refundable approval fee of five hundred thousand Naira (N500,000).
- Pre-Approval Inspection
It is required for the grant of final approval, that the CBN conducts an inspection of the premises and facilities of the proposed BNCH to, amongst others:
- Check the suitability of the physical structure of the office building and infrastructure provided for the take-off of the BNCH;
- Sight the original copies of the documents submitted in support of the application for Approval; and
- Meet with the Management team
- Post-Commencement Requirements
A BNCH is required to:
- Comply with the requirements incidental to the authorization to perform its operations as stipulated by the CBN from time to time;
- Comply with all guidelines and regulations issued by the CBN;
- Maintain an adequate accounting system and keep records that capture information that reflect the financial condition of the BNCH;
- Notify CBN upon commencement of operations.
- Technology Requirements
The guidelines make provisions that the technology implemented by the BNCH shall comply with the industry-standard technology in terms of hardware and software. The BNCH is to ensure that:
- Transaction information is transmitted securely.
- The technology deployed comprises a set of interoperable infrastructure modules that work seamlessly with the common platform provided by NIBSS.
- Customers get immediate value for successful transactions.
- Payment instructions are instantly executed.
- Immediate reversal shall be mandatory, In the event of communication failure during a transaction,
- Generation of receipts or durable acknowledgments for successful transactions.
- An audit trail is maintained and made available on request.
- All settlement information details are preserved for a minimum period of 5-years and are made available via the Cash Activity Reporting Portal (CARP).
- The BNCH shall put in place adequate measures to mitigate all the risks that could arise from the deployment and use of its IT architecture.
- Data and Network Security Requirements
BNCHs are required to put in place systems that specifically and at a minimum address the following issues:
- Availability of services.
- Data confidentiality and integrity.
- Encryption of electronic transactions.
- Customer accountability and non-repudiation of transactions.
- Error messaging and exception handling.
- Secure integration to the Cash Activity Reporting Portal (CARP).
STATUTORY RESTRICTIVE ACTIVITIES/ NON-PERMISSIBLE ACTIVITIES
By virtue of Paragraph 3.2 of the draft Guidelines for the Registration & Operation of Bank Neutral Cash Hubs (BNCH) in Nigeria, a BNCH is prohibited from the following:
- Carry out investing or lending activities.
- Receive, disburse, or engage in any transaction involving foreign currency.
- Undertake any other transaction which is not prescribed by this guideline.
- Sub-contract another entity to carry out its operations
- Any other activities that may be prohibited by the CBN.
It is silhouetted against the foregoing, that any entity seeking to operate as a Bank Neutral Cash Hub (BNCH) must meet the requirements as provided by the provisions. Failure to meet these requirements will lead to disapproval from the Central Bank of Nigeria. Therefore, all eligible entities seeking to register as a (BNCH) must register in compliance with the provisions of the guidelines when passed into law.
 Section 2 Central Bank of Nigeria Act, 2007 (CBN ACT)
https://bankingallinfo.com/importance-of-cash-management-in-bank/accessed on 13th March 2022
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 https://theconferencenews.com/pos-agents-to-face-major-rivalry-as-cbn-agreed-set-up-of-cash-centres-outside banks accessed on 13th March 2022
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