ICYMI: RipplesMetrics… DATA: How much do banks need to meet CBN recapitalisation requirement?

Some days after a meeting of the Monetary Policy Committee, where the interest rate was increased to 24.75 per cent, the Central Bank of Nigeria issued a circular that raised the minimum capital base for banks operating within the country.

According to the apex bank, the capital base for commercial banks with international standing is N500 billion. Also, there is a N200 billion threshold for national banks and N50 billion for their regional counterparts. On the other hand, non-interest banks with national and regional authorisations are expected to shore up their capital base to N20 billion and N10 billion respectively.

The circular reads that “Additional Tier 1 (AT1) Capital will not be eligible for meeting the new requirement. Despite the increase in capital, banks must ensure strict compliance with the minimum Capital Adequacy Ratio (CAR) requirement applicable to their license authorisation,” the circular read.

Ripples Nigeria reported that CBN had resolved to deploy law enforcement agencies to monitor the recapitalisation process in the banking sector.

The new developments have generated mixed reactions from financial experts. While some see the possibility of the policy growing the economy, others are concerned about the instability these policies might cause in the banking system. Alternatively, the CBN’s policy also encourages them to pursue mergers and acquisitions or to consider upgrading or downgrading their license authorisation. Still, financial organisations have called for the safe monitoring of depositors’ funds.

For this report, Ripples Metrics looked into the banks’ capital base, juxtaposing the current amount with how much is required for them to raise before the commencement of the new policy.

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According to CBN, the banks have between April 1st 2024 and March 31, 2026, two years to raise the capital requirements.

On the international scale, which is capital of N500 billion benchmark, Ecobank which has the highest capital base of N353.51 billion is expected to raise N146.49 billion.

Also Zenith Bank with N270.75 billion will raise N229.25 billion in addition. Access Bank and First Bank currently have N251.81 billion and N251.34 billion. They will need to raise N248.19 billion and N248.66 billion respectively.

For Guarantee Trust Bank, it would need N361.81 billion to add to its N138.19 billion it currently has. Also, Fidelity Bank with N129.71 billion needs N370.29 billion; FCMB with N125.29 billion needs N374.71 billion.

United Bank of Africa currently has a capital base of N115.82 billion and would need N384.18 billion. Stanbic IBTC has N109.26 billion and needs N390.74 billion while Sterling Bank with N57.15 billion capital base needs to raise as high as N442.85 billion.

On the other hand, for a national bank with a N200 billion benchmark, Jazi Bank would need to raise N181.38 billion to add to its N18.62 billion capital base. While, Unity Bank and Wema Bank with a capital base of N16.33 billion and N15.13 billion would need to raise N183.67 billion and N184.87 billion respectively.

The CBN noted that this policy was tied to factors like the impact on inflation rate which is over 30 per cent, global and domestic headwinds including the potential impact on the banks balance sheet. Other factors include the risk to profile of bank and the stress test of bank balance sheets, to gauge their resilience to absord current and unexpected shocks.

By: James Odunayo

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