Banks may lose N100b over COT policy

With the kickoff implementation of the Guide to Bank Charges on zero commission on turnover (COT) on all transactions in January, the deposit money banks would further lose a chunk of its revenue.

Specifically, over N100 billion being revenue generated annually from COT may be lost
Confirming this development at the weekend, Richard Obire, former executive director of Keystone Bank said investigations showed that out of the annual N550 billion average annual revenues for all the 21 banks, N100 billion comes from COT.

Expatiating, Obire said bank’s revenues are made up of interest on loans which constitute 70 per cent of the total revenues while fees and commission make up the remaining 30 per cent.

Fees and commission covers 30 per cent of the total revenues with COT constituting 60 per cent of income within the segment.

As a way out, Obire said banks should be moving towards income diversification. The ‘Guide to Bank Charges’ implementation, which started in March 2013 has seen the COT gradually drop to N3 per mille in 2013; N2 per mille in 2014; N1 per mille in2015 and while zero COT per mille begins January 1, this year.

Read also: FG to spend N3.2bn on mystery medical equipment

The ‘Guide to Bank Charges’ is an initiative by the Central Bank of Nigeria (CBN) to reduce charges widely seen as excessive by bank customers.

In a circular titled: “Implementation of Revised Guide to Bank Charges –Commission on Turnover,” posted on CBN’s website and signed by its Deputy Director, Financial Policy and Regulation Department, Franklin Ahonhai, the regulator had said there was no going back on the policy implementation. It mandated banks that charged excess COT since the effective date to refund same to the affected customers or be sanctioned.

The apex bank said the ‘Guide to Bank Charges’ would make it more difficult for banks to set high fees and charges without having reasons acceptable to regulators. The regulator said banks’ drive to make inroads into the legions of the country’s unbanked, financially illiterate and those isolated from traditional banking services through distance and hard terrain will be hampered by excessive charges.

It said the guideline was meant to address complaints arising from bank tariffs and other miscellaneous fees charged by banks on their customers’ accounts.

The policy is also expected to ensure greater competition in the retail banking and achieve real benefits for customers through lower costs, better service and greater access of financial services to poor communities whilst at the same time preserving the stability of the banking system.

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