The Central Bank of Nigeria on Monday released the Nigerian payments system risk and information security management framework to guide the management of risks associated with the payments system in Nigeria.
The framework which had already been approved by the apex bank became imperative in order to identify and address sources of systemic risks within the Nigerian payments system landscape.
Some of the risks that the framework is expected to address are systemic risks; credit risk; liquidity risk; operational risk; compliance, legal and regulatory risk, settlement risk and information security risk.
The framework is also meant to establish sound governance arrangements to oversee the risk management
framework by ensuring that risks are identified, monitored, treated; and establish clear and appropriate rules and procedures to carry out the risk management objectives.
Other objectives of the framework are to employ the resources necessary to achieve the payments system’s risk management objectives and integrate risk management into the decision making processes.’
The apex bank said the framework would guide the operators and users of the payment systems across Nigeria.
It said these systems may be organized, located, or operated within Nigeria (domestic payments), outside Nigeria (offshore payments), or both (cross-border payments) and may involve currencies other than the Naira.
It reads in part, “At a minimum, the risk management framework shall establish sound governance arrangements to oversee the risk management framework; set sound risk management objectives and establish processes for identifying the key risks associated with the payment scheme; establish clear and appropriate rules and procedures to pursue the stated objectives.
It added that framework would, “employ the resources necessary to achieve the system’s risk-management objectives and implement effectively its rules and procedures; and build resilience and security adequate to ensure the confidentiality, integrity and availability of the system.”
The CBN said the framework is, however, not intended to apply to bilateral payment, clearing, or settlement relationships, where a payment system is not involved.
The rapid growth in the volume and value of financial transactions has significantly altered the risks associated with the payment and settlement of these transactions.
As a result, payment and settlement systems are important potential sources of systemic risks.
Furthermore, payments system may increase, shift, concentrate or otherwise transform risks in unanticipated ways.
The failure of one or more of the participants in a payment system to settle their payments or other financial transactions could create credit or liquidity problems for participants and their customers.
Such a failure may ultimately undermine public confidence in the nation’s financial system.
The apex bank in the framework said it had become imperative to effectively manage the risks associated with the payments system, as disruptions may originate from any of the interdependent entities.
