CBN urges e-payment service providers to offset banks’ exposure to glitches

The Central bank of Nigeria (CBN) has frowned at the growing exposure of banks on the platform of the payments solution service providers (PSSPs) due to operational failures.

The apex bank, in a circular signed by its Director of Banking and Payments System Department, Mr. Dipo Fatokun, to all the PSSPs, switches and banks, directed that irrecoverable exposures in the event of any shortfall shall henceforth be borne by the PSSPs in line with the Payments Solution Service Providers’ Scheme, which operates a collateral arrangement adequate to offset irrecoverable exposures in the event of any shortfall.

It then urged the PSSPs to ensure implementation of adequate system exception monitoring tools to assist the banks in detecting anomalies that could lead to exposures.

Fatokun, in the memo entitled Circular on the Prevention of Exposures to Banks through Payments Solutions, mandated both the banks and the PSSPs to give values to customers on a T+1 basis.

He stated:“In furtherance of its responsibility for effective oversight of the payments system, and the need to address the issue, the bank hereby direct as follows:

“All banks and Payments Solution Service Providers, for the purpose of payments under the guidelines on electronic payments of salaries, pensions, suppliers and taxes in Nigeria should give values to customers after settlement at T+1.

Exceptions that would necessitate instant value to customers, it stated include:

“Where the paying organisations and/or sending    banks pledge collateral against their transactions, for which they require instant value to customers;

“The Payments Solution Service Providers’ Scheme operates a scheme collateral arrangement which is adequate to offset irrecoverable exposures. In the event of any shortfall of such collateral arrangement, the shortfall shall be borne by the Payments Solution Service Providers.

“All payments solution service providers should ensure implementation of adequate system exception monitoring tools , including alerts, to aid banks in detecting anomalies that could lead to exposures.

“All payments solution service providers shall jointly determine with participating banks, ICT resources capacity planning for banks transaction levels.”

In addition, banks and PSSPs shall ensure that their systems are not overstretched by the level of transactions being supported by providing necessary headroom for all critical ICT resource used in facilitating payments services”