3 banks fail to meet regulatory liquidity ratio in H1 18

Three banks were said to have failed to meet the regulatory liquidity ratio in the first half of 2018 according to a draft first half economic report released on Thursday by the Central Bank of Nigeria (CBN).
Although the names of the affected banks were not given, the liquidity ratio for commercial banks remains at 30 percent, merchant banks 20 percent, 10 percent  for non-interest.
The report revealed  that the industry liquidity ratio increased to 46.09 per cent at the end of the first half of 2018, from 45.8 per cent at the June of 2017, reflecting the rise in the stock of liquid assets held by banks.
However, the health of banks improved in the review period, following the sustained recovery in macroeconomic conditions, including declining inflation, stable exchange rate and gradual upswing in the real economy. At the end ofJune 2018, the industry average capital adequacy ratio (CAR) was 12.08 per cent, compared with 10.23 per cent and 11.51 per cent at end-December 2017 and at the end of June 2017, respectively. The development reflected the increase in banks’ total qualifying capital. The industry threshold, however, remained at 15.0 per cent for banks with international authorisation and 10.0 per cent for banks with either national or regional authorisation.

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The CBN and NDIC Joint Risk Asset Assessment (Target) Examination was conducted on 26 banks in the review period. The exercise was carried to ascertain the quality of risk assets and the adequacy of loan loss provisioning, as a prerequisite for the approval of the publication of 2017 annual financial statements. The examination also sought to determine the reasonableness of banks’ reported profit for the 2017 financial year. The examination revealed an increase in the non-performing loans (NPLs) ratio and a marginal decline Okin capital adequacy ratio (CAR), due to deterioration of asset quality. The industry average CAR, however, remained above the regulatory minimum of 10.0 and 15.0 per cent for banks with national and international authorisation, respectively.
The Bank conducted a review of foreign exchange operations of 26 banks (22 commercial and 4 merchant) in April 2018 to ascertain the level of compliance with extant foreign exchange regulations. The review covered ĺforeign exchange activities for the period, April 1, 2017 to March 31, 2018.
Major infractions observed included: non-repatriation of export proceeds within the stipulated time; dealing in high value foreign exchange transactions with multiple corporate customers yet to be on-boarded on the FMDQ Advised Trading and Surveillance System; and rendition of inaccurate returns. Others were non-compliance with approved net foreign currency trading th CBN also resolved the technical and business-related challenges, arising from the deployment and use of the redesigned Credit Risk Management System (CRMS).osition, foreign trade documentation lapses and general failure to comply with regulations.

Hope Moses-Ashike