The Central Bank of Nigeria (CBN) recently demonstrated its commitment to sanction banks whose money transfer transactions exceed four minutes, among other infractions, by serving them sanctions of various amounts.

For instance, the latest in the series of financial fines on banks was last month’s N5.87 billion fine imposed on four banks-Standard Chartered Bank, Stanbic-IBTC, Citibank and Diamond Bank. Their offence was flagrant violation of extant laws and regulations of the Federal Republic of Nigeria, including the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, 1995 of the Federal Republic of Nigeria and the Foreign Exchange Manual, 2006.

What about the seven banks that were also axed for delayed financial results by both the Nigerian Stock Exchange (NSE) and CBN early in the year?

The Nigerian Stock Exchange fined the seven financial institutions for not filing their financial results before the regulatory due date.

The affected banks were First Bank, Wema Bank, Sterling Bank, Sovereign Trust Insurance, Fidelity Bank, First City Monument Bank and Abbey Mortgage Bank.

According to the listing rules provided by the stock exchange, companies are expected to submit their financial year-end result latest by 90 days after the end of each year.

Quarterly results are also expected to be submitted at most 60 days after the end of each quarter.

In its Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for Fiscal Years 2018/2019, the Central Bank of Nigeria threatened to remove the chairman and managing director of any bank that fails to publish its financial results 12 months after the period under review ends.

The CBN also said it would bar the chief executive or his/her nominee from participation at the Bankers’ Committee and disclose the reason for such suspension.

As penalty for delaying their financial results, the institutions are expected to pay the following fines:

First Bank – N2.1 million; Abbey Mortgage Bank – N700,000; First City Monument Bank – N100,000; Fidelity Bank – N2.7 million; Sovereign Trust Insurance – N2.1 million; Sterling Bank – N1.3 million and finesWema Bank – N800,000.

Also recall that four commercial banks paid fines totalling N493.27 million in two years for contravening the Banks and Other Financial Institutions Act (BOFIA). The affected banks were United Bank for Africa (UBA), FCMB Group, Access Bank and Guaranty Trust Bank Plc.

A breakdown of the figure as contained in the banks’ annual reports showed that UBA paid the highest fine of N162.64 million for various contraventions during the period under review.

Specifically, the bank paid N75 million in the 2017 financial year for various contraventions having paid N87. 64 million in 2016.

It was trailed by Access Bank which paid N133.48 million in all, N78 million in 2017 after paying about N55.48 million in 2016.

The FCMB Group paid a total of N117. 02 million, and N28.26 million in 2017, and N88.76 million in 2016.

Similarly, GTBank paid N80.13 million for various contraventions, which include N18.08 million in 2017 and N62.05 million in 2016.

In August 2016, the CBN had to bar nine commercial banks from all foreign exchange transactions and operations. Their offence was the hiding of $2.12 billion belonging to the Nigerian National Petroleum Corporation (NNPC) and failed to remit the funds into the Treasury Single Account (TSA). The banks, whose suspension were lifted only after the apex bank received their repayment plan were United Bank for Africa (UBA) $530 million; First Bank of Nigeria (FBN), $469 million; Diamond Bank, $287 million; Sterling Bank Plc, $269 million; Skye Bank Plc , $221million; Fidelity Bank, $209million; Keystone Bank, $139 million; First City Monument Bank, FCMB $125million; and Heritage Bank, $85 million.

Also in May 2017, CBN also banned 17 banks from dealing in the SME wholesale forex window for deliberately frustrating efforts by many Small and Medium Enterprises to access the new window created by the apex bank.

The financial regulator, it was gathered, took the decision to bar the erring banks based on field reports, which revealed that only eight banks had sold forex to the SMEs segment since the inception of the new window.

The eight banks were Access Bank Plc, Diamond Bank Plc, Fidelity Bank, Heritage Bank, Jaiz Bank, Sterling Bank, Unity Bank and Zenith Bank.

According to the apex bank’s spokesman- the acting Director, Corporate Communications- Isaac Okorafor, the CBN would not sit back and allow any form of instability in the interbank forex market through the actions of institutions or individuals.

He said all banks that had refused to sell forex to the SME actors after accessing over $300 million offered to the SMEs wholesale forex window since its creation the previous month would be sanctioned accordingly.

Just last week, disturbed by the unending customers’ complaints on the electronic payment system, its Director of Banking and Payments System Department, Dipo Fatokun, came out with a circular prescribing N10,000 fine for any bank whose money transfer exceeds four minutes.

The circular on regulation of instant inter-bank electronic funds transfer services in Nigeria issued to all deposit money banks, microfinance banks, other financial institutions, mobile money operators, development finance institutions, payment service providers and other stakeholders, Fatokun stated that any failed instant payment transaction not reversed into the customer’s account within 24 hours, based on the complaint of the sender and/or beneficiary, will attract another fine of N10,000. The regulation is expected to take effect from next month.

The circular stated that electronic funds transfer or an NIP happens between two distinct entities when the delivery from the sending entity to the receiving entity takes place within one minute (60 seconds), while a payments system where delivery to the receiving entity occurs beyond one minute is considered to be an ACH system.

According to the circular, on an occasion where a sending entity erroneously sends value contrary to the customer’s instructions due to wrong account number, wrong amount, and duplication, among others, to a receiving entity and requested the reversal in writing within 14 working days of the transaction, the receiving entity should oblige within one business day without recourse to the customer (beneficiary) of the receiving entity provided funds are available. An automatic indemnity would be inferred against the sending entity making the reversal request.

Commending CBN for the initiative, the President of Bank Customers Association of Nigeria (BCAN), Dr Uju Ogubunka, said it would be very good if banks could consummate transactions within the shortest possible time.

His words: “If that is what CBN is directing banks to do, I think that is very good. In fact, it is very excellent, so that we can fast track transactions; and people can put their minds at rest and do other things. A situation where you make a transfer and takes several hours, and sometimes, days to get to the beneficiaries is not good enough. And I think that the technology available today supports faster delivery of such services. It is one thing, however, for CBN to make this regulation and it is another thing for it to follow it up.

“But how will CBN know that the transaction is not consummated within four minutes or within 24 hours, except maybe somebody reports. And how many people are ready to report?

Another issue is that if CBN penalises the bank, who takes the benefits of that penalty in terms of value; the N10000? Are you going to credit it to the customer that was short-changed? Or CBN will take it? Or CBN will accumulate all of these for the training, education or for the enlightenment of the customers? That is another question. Or will CBN begin to declare it as part of its own earnings?

Speaking on the various penalties, Prof. Uche Uwaleke, the Head of Banking and Finance Department, Nasarawa State University, Keffi, said banks contravene rules for obvious reasons.

Uwaleke said the benefits of contraventions outweighed the costs and as rational economic agents, the banks chose to be in breach and face the consequence, which was a mere slap on the wrist.

On the way forward, he said that the apex bank should ensure that the cost of contravention was high enough to serve as deterent.

According to him, enforcement of stiff penalties will surely reduce the propensity to flout regulations by the banks.

Mr Moses Igbrude, General Secretary, Independent Shareholders Association of Nigeria (ISAN), said payment of penalties as a way of enforcing compliance with rules and regulations was disadvantageous to shareholders.

Igbrude said it was the duty and responsibility of the management of the banks to comply with all the rules to avoid paying fines or penalties by employing compliance officers.

According to him, the compliance officers should be trained and equipped on how to monitor and supervise to ensure adherence to all rules to avoid payment of huge fines to the regulators.

“Where such officers fail in their duties, they should be made to pay such fines or penalties from their salaries,” he said.

Igbrude said the CBN and other regulators should not use money, fines or penalties as the only tools of ensuring compliance.

“They should not be seen as money mongers or using it as a major source of revenue to the detriment of shareholders.

“We shareholders will continue to engage management of banks on best ways to minimise or eliminate this challenge of compliance to rules and regulations,” he said.

Mr Boniface Okezie, the National Coordinator, Progressive Shareholders Association of Nigeria, said that banks should do everything possible to avoid falling prey to CBN sanctions.

Okezie said some of the contraventions would have been resolved administratively as against the depletion of shareholders and banks operational funds.

He said the management of the banks should be made to pay the penalties but not at the expense of the shareholders.

Okezie said that the amount of money paid by banks for contravention was worrisome and regrettable, noting that shareholders suffer the consequences.