Omodele Adigun
As from November 11, any institution applying for an indirect participant in the nation’s Payments System must have a satisfactory risk-based rating from the Central Bank of Nigeria (CBN).
This is one of the qualifying conditions stipulated by the apex bank as contained in the Regulation for the Operation of the Indirect Participants in the payment system issued last Thursday by its Director, Payments System Management Department, Mr Sam Okojere.
According to Okojere, an indirect participant is also expected to settle all its payments obligations through only one direct participating bank per payment scheme at any given time.
An Indirect Participants are payments service providers who are non-clearing financial institutions but settle their payments obligations through clearing banks.
According to the guideline, to qualify as an indirect participant, an institution shall: have a satisfactory risk-based rating from the CBN and secure a letter of recommendation from its direct participating bank, signed by the Chief Risk Officer and an Executive Director of the direct participating bank. The regulation adds: “The relationship between a direct participating bank and an indirect participant shall be governed by a Settlement Agreement.
“Where the account of an indirect participant with a direct participating bank is not adequately funded, the direct participating bank may decline further settlement services to the indirect participant and inform the payment processor accordingly.
“Except as otherwise agreed, a direct participating bank or an indirect participant shall give at least thirty 30 days’ notice to the other party before terminating the Settlement
“The terminating party shall notify the Payments Service Provider (PSP) of its intention to terminate.
“A direct participating bank and an indirect participating bank shall enter into a bilateral agreement to guide the relationship.
“Where an indirect participant connects directly to a PSP for transaction processing, the indirect participant, direct participating bank, and the PSP shall enter into a tripartite agreement”, the bank directed.
It also directed that indirect participants must process their e-reference instruments through the direct participating bank or directly, through the Nigeria Inter-Bank Settlement System (NIBSS).