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Top 5 Banks Face N1.5trn Deficit in Meeting CBN’s New Capital Base

The top five banks face a N1.5 trillion gap in meeting the new minimum capital base set by the Central Bank of Nigeria (CBN) for foreign commercial banks.

In a statement issued yesterday, the CBN announced new minimum capital requirements for banks, increasing the minimum capital base for commercial banks with international authorization by 900 percent, to N500 billion from N50 billion.

Mrs. Hakama Sidi Ali, Acting Director, Corporate Communications Department, confirmed this in Abuja yesterday in a statement, saying the new minimum capital base for commercial banks with national authorization is now 200 billion, a 700 percent increase from N25 billion.

She also stated that the new criteria for commercial banks with regional licensing has been raised to N50 billion, a 400% increase from N10 billion.

Mrs. Sidi Ali further stated that the new minimum capital need for merchant banks is N50 billion, while the new criteria for non-interest banks with national and regional authorizations are N20 billion and N10 billion, respectively.

Mr. Haruna Mustafa, Director of the Financial Policy and Regulation Department, issued a circular to all commercial, merchant, and non-interest banks, as well as promoters of proposed banks, emphasizing that all banks must meet the minimum capital requirement within 24 months, beginning April 1, 2024 and ending March 31, 2026.

The move, announced by CBN Governor Olayemi Cardoso at the Annual Bankers’ Dinner in November 2023, aims to strengthen banks’ resilience, solvency, and capacity to promote Nigerian economic growth.

To achieve the minimum capital requirements, the CBN advised banks to consider injecting new equity capital through private placements, rights offerings, and/or subscription offers; mergers and acquisitions (M&As); and/or upgrades or downgrades in license authorization.

Furthermore, the circular said that the required capital will only include paid-up capital and share premiums. It highlighted that the new capital requirement will not be dependent on the Shareholders’ Fund.

“Additional Tier 1 (AT1) Capital will not be eligible to meet the new requirement. Regardless of the capital increase, banks must strictly adhere to the minimum capital adequacy ratio (CAR) required for their license approval.

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

According to the CBN circular, proposed banks must have paid-up capital. The new minimum capital requirement would apply to all new banking license applications received after April 1, 2024.

It stated that the CBN will continue to process all pending banking license applications for which a capital deposit and/or an Approval-in-Principle (AIP) had been received. However, it stated that the promoters of such proposed banks will pay the difference between the capital deposited with the CBN and the increased capital requirement no later than March 31, 2026.

Meanwhile, the CBN stated that all banks must submit an implementation strategy (clearly detailing the chosen option(s) for fulfilling the increased capital requirement, as well as the numerous actions and dates involved) by April 30, 2024. The CBN further stated that it would monitor and verify compliance with the new standards within the given time frame.

Under the new minimum capital requirement, each of the top five banks (Access Bank, FirstBank, GTBank, UBA, and Zenith Bank) must have a minimum capital base of N500 billion.

The CBN, however, stated that the minimum capital requirement is restricted to paid-up capital and share premium.

As a result, the five banks are expected to have a total paid-up capital and share premium of N2.5 trillion.

According to Vanguard’s latest financial statements, the combined paid-up capital and share premium of the top five banks were N1.037 trillion, reflecting a N1.472 trillion gap.

According to the CBN’s regulations, Access Corporation, the parent company of Access Bank, has a paid-up capital and share premium of N251.811 billion as of yesterday’s 2023 full-year results, leaving a deficiency of N248.189 billion.

FBN Holdings, the parent company of FirstBank, has paid-up capital and share premium of N251.3 billion, resulting in a deficiency of N248.66 billion, according to its Q3’23 figures.

The paid-up capital and share premium of GTHoldco, the parent company of GTBank, stands at N138.186 billion as of Q3’23, resulting in a deficiency of N361.814 billion.

UBA has paid-up capital and share premium of N115.815 billion, resulting in a shortfall of N384.185 billion, according to its Q3’23.

Zenith Bank has a paid-up capital and share premium of N270.745 billion, leaving a shortfall of N229.255 billion.

 

 

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