The tier II deposit money banks operating in the country would require about N89.15 billion to raise their capital adequacy ratio (CAR), the Central Bank of Nigeria (CBN) has said.
This is against the background of these banks’ CAR which deteriorated to 5.56 percent in December 2013 from 18.33 percent previously, below the required minimum of 10.0 percent.
A solvency stress test was conducted on the banking industry as at December 31, 2013 to assess the stability of the sector under various hypothetically strained macroeconomic conditions.
According to the CBN, the pre-shock CARs for the entire banking industry, large, medium and small banks stood at 17.20 percent, 16.24 percent, 18.05 percent and 18.33 percent, respectively. These reflected decreases of 1.49 percent, 2.62 percent, 0.2 percent and 0.5 percentage points over the end of June 2013 positions. Similarly, the pre-shock liquidity ratios for the banking industry, large and medium banks declined by 18.68, 19.47 and 13.15 percentage points to 51.02, 50.75 and 62.30 percent, respectively, compared with the end of June 2013 positions. However, the pre-shock liquidity ratio for small banks increased by 5.96 percentage points.
The Financial Stability Report for December 2013 released on Friday by the CBN shows that the pre-shock ROAs for the entire banking industry, large, medium and small banks were 2.31, 3.04, 2.42 and 2.02 percent, respectively, with large banks being the most profitable, while ROEs stood at 19.83, 22.14, 20.40 and 17.56 percent, respectively.
Generally, the banking industry resilience to credit risk sustained an upward trend as the average industry CAR stood at 12.42 percent under a shock scenario of 200 percent rise in NPLs. Also, large banks and medium sized banks were less vulnerable to general credit risks as their average CARs fell from 17.64 percent to 12.21 percent and 17.03 percent to 11.45 percent, respectively.
