CBN issues recapitalisation deadline to 3 banks

The Central Bank of Nigeria (CBN) has given three banks a seven-month deadline to recapitalise and beef up their capital base after they failed to meet the minimum capital adequacy ratio of 10 per cent. The three banks are expected to have recapitalised on or before June 30, 2016.
A report by the apex bank did not mention the three banks but it provided a descriptive view of the banks. According to the apex bank, the three inadequately capitalised banks belong to the group of 14 that have licenses to operate as regional and national banks. Regional banks are expected to have minimum capital base of N10 billion while national banks are expected to have minimum capital base of N25 billion.
The apex bank said it was monitoring the three banks’ recapitalisation plans, noting that 10 other banks with international status met the 15 per cent minimum capital base for that category of banking as at the review period ended June 30, 2015.
Nigerian banks have been under pressure due to impending adoption of stricter international requirements, loan impairments due to the global oil crisis, foreign exchange crisis and tighter monetary regulatory policies.
A source in the banking industry said Wema Bank, which last week announced its upgrade from regional to national bank and unveiled plan to raise about N20 billion, $100 million, might be one of the banks. The source said the other banks might be one Abuja-based bank and a Lagos-based national bank. Skye Bank has also outlined capital raising plan, but the bank has insisted that it has adequate capital base and its capital raising has nothing to do with undercapitalisation.
Wema Bank said it plans to raise sum $100 million in Tier 2 capital in a bid to position the bank for growth. It last week notified the Nigerian Stock Exchange (NSE) that its banking licence has been upgraded from regional to national banking by the CBN.
Managing director, Wema Bank Plc, Mr. Segun Oloketuyi, said that the bank is “already in the process of raising $100 million in Tier 2 capital” to ensure that its national banking licence is adequately utilised.
Nigerian banks and other companies have been forced to suspend planned new offers and capital raising due to the downtrend at the Nigerian capital market. Many companies had opted to delay their new issues because of the significant undervaluation of their fundamentals by the losing spree. Recent new issues by banks, including United Bank for Africa and Access Bank, were undersubscribed.

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A report had indicated that Nigerian banks might need to raise some N400 billion to strengthen their capital base in view of the impending implementation of the Basel II.
The Basel II is the second global standards of capital adequacy issued by the Basel Committee on Banking Supervision under the auspices of the Basel, Switzerland-based Bank for International Settlements (BIS), the oldest international financial organisation that coordinates central banks and standards for the international financial markets.
The Basel Committee has issued three sets of the global standards including Basel I, Basel II and Basel III, which increased and stricter capital risks and exposure management requirements from one level to another.
Basel II seeks to strengthen banks’ risk and capital management through three main areas, otherwise known as pillars. The first pillar deals with minimum capital requirements, the second pillar deals with supervisory review process while the third pillar deals with processes relating to market discipline. The pillars generally ensure that the greater the risk to which a bank is exposed, the greater the amount of capital and required supervisory framework.

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