In furtherance of its objective to ensure that banks and other financial institutions provide relevant information to their customers, the Central Bank of Nigeria (CBN) recently issued fresh guidelines to give effect to the disclosure and transparency principle contained in the Consumer Protection Framework (CPF).
The guidelines provide minimum disclosure and transparency requirements to ensure that all financial institutions provide customers with all material and relevant information regarding their relationship in a clear and transparent manner.
According to the CBN, the objective of the new guidelines is, among others, to protect customers against provision of inadequate, misleading or failure to disclose relevant information, and generally guard against lack of transparency by financial institutions in the country in their dealings with consumers. The disclosure and transparency framework has come shortly after the Responsibility Conduct in business governance was introduced to strengthen customers/banks relationship.
The guidelines apply to all transactions by financial institutions licensed and regulated by the apex bank and their agents, subsidiaries and associates such as Deposit Money Banks (DMBs), Merchant banks, specialized banks, Microfinance Banks (MFBs), Development Finance Institutions (DFIs), Finance Companies (FCs), Bureau-de-Charge (BDCs) and Primary Mortgage Banks (PMBs). Others include Credit Bordeaux, Mobile Money Operators, Payment Service Banks, Switching Companies, Payment Solution Service Providers, Super Agents and Non-bank Acquirer.
To promote full disclosure and transparency, financial institutions are required to ensure that contracts, offer letters, statement of accounts, notices and other documents provided to consumers are written in clear, legible and simple to understand English Language, including contact details of the financial institutions and individual customer. With the new guidelines in place, it would no longer be business as usual.
We support the new guidelines and hope that they will enhance transparency and full disclosure in the banking and other financial services sector. The new measures entail that before going into business transactions, there is need for customers and financial institutions to know the details. With the role of financial institutions becoming increasingly challenging, consumers have become important players in the business of banking. And with consumers’ deposits now the largest source of funds for financial institutions, it has become imperative that banks and other financial institutions must embrace the culture of full disclosure and transparency at all times.
It is commendable that the CBN has unveiled the guidelines at this time that the banks and other financial institutions are expected to play key role in the development of the economy as financial intermediaries. Unfortunately, this role has not been performed creditably by some of these institutions. However, the money and capital markets must emphasise the urgent need for transparency and disclosure in the sector. This will also change the perception of many Nigerians that financial institutions have not been as transparent as they ought to be.
Therefore, providing guidelines for all transactions in the sector will provide a model for measuring returns and risks in the sector. By providing detailed information to consumers, the banks and financial institutions would know their strengths and weaknesses. For the banking industry to move to the next level and compete with their peers in advanced countries, they must abide by the principle of disclosure and transparency as enshrined in the Consumer Protection Framework.
It will be recalled that in 2016 and early this year, the CBN had issued similar guidelines to Development Finance Institutions (DFIs) and Primary Mortgage Banks (PMBs) as part of measures to enable them fulfill their core mandates. For coming out with new guidelines that will strengthen the banks and other financial institutions, we believe that the CBN is quite in order. Therefore, we enjoin the banks to adhere strictly to the guidelines contained in the Consumer Protection Framework. We believe that it is in their best interest to do so.