CBN directs banks to establish Banks Neutral Cash Hubs

The banking sector regulator, the Central Bank of Nigeria (CBN) and Bankers’ Committee has directed Deposit Money Banks and licensed processing companies to establish Banks Neutral Cash Hubs (BNCH) to reduce their cash management costs.

The policy is expected to work through technology, reduce cash as cash management has for decades constituted a large part of banks and other financial institutions’ costs.

The inauguration of the hubs was meant to reduce cost and improve efficiency in the cash management value chain.

The BNCH is expected to run on technology deployed by participating entities.

The regulator said the technology implemented by the BNCH shall comply with the industry standard technology in terms of hardware and software.

The BNCH, it said, shall ensure that transaction information is transmitted in a secure manner, the technology deployed comprises a set of interoperable infrastructure modules that work seamlessly with the common platform provided by the Nigeria Interbank Settlement System (NIBSS) and that customers get value for successful transactions.

The CBN also directed BNCH to ensure that payment instructions are executed, immediate reversal shall be mandatory, in the event of communication failure during a transaction, generation of receipts or durable acknowledgements for successful transactions.

Also, audit trail is maintained and made available on request while settlement information details are preserved for five years, and are made available via the Cash Activity Reporting Portal (CARP).

The BNCHs are also required to put in place systems that specifically and at a minimum address availability of services, data confidentiality and integrity, encryption of electronic transactions.

Also to be addressed are customer accountability and non-repudiation of transactions, error messaging and exception handling, and need to secure integration to the Cash Activity Reporting Portal (CARP).

The apex bank said the scheme would reduce cost and improve operational efficiency in the country’s cash management value chain. “The financial requirement for an approval to operate as BNCH, which may be amended by the CBN as it deems necessary, include non-refundable application fee of N100,000, and non-refundable approval fee of N500,000.

“The BNCHs are cash collection centeres to be established by registered (licensed) processing companies or Deposit Money Banks (DMBs) based on business needs. They will be located in areas with high volumes of commercial activities and cash transactions. The hubs will provide a platform for customers to make cash deposits and receive value irrespective of the bank with which their account is domiciled,” the guideline added.

Continuing, the CBN said that the key objective of setting up BNCH is to reduce the risks and cost 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.

The regulator also spelt out functions of a BNCH, saying it may receive naira denominated deposits on behalf of financial institutions from individuals and businesses with high volumes of cash.