• Tuesday, May 21, 2024
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BusinessDay

CBN gives banks 24 months to increase capital base

Nigerian banks’ low assets-to-GDP explains recapitalisation

The Central Bank of Nigeria (CBN) has issued a 24-month ultimatum to banks to raise their capital base to a new minimum in a move to strengthen the financial system.

The new requirement puts the minimum capital base for banks with international authorisation at ₦500 billion.

CBN also raised the minimum capital base for commercial banks with national authorisation to ₦200 billion, while those with regional authorisation was jerked up to ₦50 billion.

Also, the minimum capital for merchant banks is now ₦50 billion, while the new requirements for non-interest banks with national and regional authorisations were raised to ₦20 billion and ₦10 billion, respectively.

This was announced Thursday night in a statement released by Hakama Sidi Ali, the CBN acting director, corporate communications department.

The move which was initially disclosed by the CBN Governor, Olayemi Cardoso, in his address to the Annual Bankers’ Dinner in November 2023, is to enhance banks’ resilience, solvency, and capacity to continue supporting the growth of the Nigerian economy.

Quoting a circular signed by Haruna Mustafa the CBN director, financial policy and regulation department to all commercial, merchant, and non-interest banks and promoters of proposed banks, Sidi Ali emphasized that the timeline for the recapitalisation programme is within 24 months commencing from April 1, 2024, and terminating on March 31, 2026.

To enable the banks meet the new minimum capital requirements, the CBN urged them to consider injecting fresh equity capital through private placements, rights issues and/or offers for subscription; Mergers and Acquisition s; and/or upgrade or downgrade of license authorisation.

Furthermore, the circular disclosed that the minimum capital shall comprise paid-up capital and share premium only. It also stressed that the new capital requirement shall not be based on the Shareholders’ Fund.

“Additional Tier 1 (AT1) Capital shall not be eligible for meeting the new requirement. Notwithstanding the capital increase, banks are to ensure strict compliance with the minimum capital adequacy ratio (CAR) requirement applicable to their license authorisation.

“In line with extant regulations, banks that breach the CAR requirement shall be required to inject fresh capital to regularise their position,” it added.

The CBN circular said the minimum capital requirement for proposed banks shall be paid-up capital, adding that the new minimum capital requirement shall apply to all new applications for banking licenses submitted after April 1, 2024.

It noted that the CBN would continue to process all pending applications for banking licenses for which a capital deposit had been made and/or an Approval-in-Principle (AIP) had been granted.

However, it said that the promoters of such proposed banks would make up the difference between the capital deposited with the CBN and the new capital requirement not later than March 31, 2026.

Meanwhile, the CBN said all banks are required to submit an implementation plan (clearly indicating the chosen option(s) for meeting the new capital requirement and various activities involved with their timelines) not later than April 30, 2024.

The CBN also disclosed that it would l monitor and ensure compliance with the new requirements within the specified timeline.