June 22, 2015/Leadership/ Bukola Idowu

our deposit money banks have been fined N576 million by the Central Bank of Nigeria (CBN) for misclassifying some public sector deposits and not remitting what they should as cash reserve requirement in 2014.

The CBN had in the first quarter of 2014 increased cash reserve requirement for public sector deposits from 50 per cent to 75 per cent in an effort to manage the pressures on the naira and the country’s external reserve.

This caused a liquidity crunch in the market taking out an additional N800 billion from the financial system. But as the credit crunch began to bite hard into banks’ profitability and the nation, the apex bank harmonised to 31 per cent, from 75 and 20 per cents cash reserve requirement (CRR) on the public and private sectors respectively.

Skye Bank paid the largest fine of N323 million, followed by Access Bank which paid N174 million while Sterling and Zenith a Banks paid N50 million and N32 million respectively. In 2014, Skye bank recorded a deposit base of N952.3 billion and a profit before tax of N10.47 billion.

The CRR misclassification fine was the biggest fine for Skye Bank which paid a total of N330 million for various contraventions in 2014. This was the same for the other three banks.

Access Bank had paid N184 million as fines for various contraventions during the 2014 financial year of which 94 per cent was for PSD CRR misclassification. The bank had last year posted an interest income of N176.91 billion and N52.02 billion profit before tax. It had a also recorded a customers deposit of N1.45 trillion.

Of the total N51.5 million fine for various contraventions, Sterling Bank had paid 97 per cent to the CBN as PSD CRR misclassification fine. The bank had made a N77.93 billion interest income and N10.74 billion profit before tax in the 2014 financial year. At the close of business last year, the bank had a deposit base of N655.94 billion.

Zenith Bank had also paid 66.7 per cent of the N48 million total fine for misclassifying public sector deposits last year. The bank had which posted an interest income of N313.42 billion, recorded a profit before tax of N119.79 billion, while its deposit base stood at N2.53 trillion.

Commenting on the fine paid, the managing director and chief executive of Skye Bank, Timothy Oguntayo explained that when the CRR on public sector deposits was raised, the CBN did not give a clear guidelines on what should be classified as public sector deposit.

“When the circular was introduced,mere was no clarity and what we know as public sector funds are ministries, government departments and agencies like NIMASA, National Health Insurance Scheme (NHIS), but the CBN stretched it to Obafemi Awolowo University (OAU), and some other entities that are not relying fully on government funding.

“This is something that came up and was hotly contested but when you fight with your regulator, if they decide you can’t win, then you cannot win. The confusion is what informed the harmonization because you can actually do the same thing you want to do by coming out with uniform CRR rate and that is what happened,” Oguntayo stated.

When called for comments, the director, Corporate Communications Department, Ibrahim Mu’azu, said he was out of the country and could not make comment.