Banks Fret Over CBN New Minimum Capital Base Requirements For Operators
…Gives Banks 24 months To Recapitalise
By Emmanuel Uffot
Amidst the current cash crunch facing commercial banks in Nigeria, they are in for more worries if the new minimum capital base requirements unveiled by the Central Bank of Nigeria (CBN) for banks to strengthen the financial system is anything to go by.
Following the discordant tunes enveloping the banking sector due to complaints by customers low cash in the banks,the CBN may have jolted the money deposit banks and micro-finance banks on Thursday, March 28, 2024, when it unveiled new minimum capital requirements for banks, pegging the minimum capital base for commercial banks with international authorisation at N500 billion.
According to the Acting Director, Corporate Communications Department, Mrs. Hakama Sidi Ali who confirmed the development ,the new minimum capital base for commercial banks with national authorisation is now N200 billion, while the new requirement for those with regional authorization is N50 billion.
Mrs. Sidi Ali also disclosed that the new minimum capital for merchant banks would be N50 billion, while the new requirements for non-interest banks with national and regional authorisations are N20 billion and N10 billion, respectively.
A circular signed by the Director, Financial Policy and Regulation Department, Mr. Haruna Mustafa, to all commercial, merchant, and non-interest banks and promoters of proposed banks emphasized that all banks are required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, and terminating
on March 31, 2026
According to the circular, the move, initially disclosed by the CBN Governor, Olayemi Cardoso, in his address to the Annual Bankers’ Dinner in November 2023, was to enhance banks’ resilience, solvency, and capacity to continue supporting the growth of the Nigerian economy.
“To enable them to meet the minimum capital requirements, the CBN urged banks to consider inject fresh equity capital through private placements, rights issues and/or offers for subscription; Mergers and Acquisitions (M&As); and/or upgrade or downgrade of license authorisation”.
Furthermore, the apex bank disclosed that the minimum capital shall comprise paid-up capital and share premium only. It stressed that the new capital requirement shall not be based on the Shareholders’ Fund.
It explained that the Additional Tier 1 (AT1) Capital shall not be eligible for meeting the new requirement. Notwithstanding the capital increase, banks are to ensure strict compliance with the minimum capital adequacy ratio (CAR) requirement applicable to their license authorisation.
On sanction for non-complaince CBN noted
“In line with extant regulations, banks that breach the CAR requirement shall be required to inject fresh capital to regularise their position,”.
The CBN circular said the minimum capital requirement for proposed banks shall be paid-up capital, adding that the new minimum capital requirement shall apply to all new applications for banking licenses submitted after April 1, 2024.
It noted that the CBN would continue to process all pending applications for banking licenses for which a capital deposit had been made and/or an Approval-in-Principle (AIP) had been granted. However, it said that the promoters of such proposed banks would make up the difference between the capital deposited with the CBN and the new capital requirement no later than March 31, 2026.
Meanwhile, the CBN said all banks are required to submit an implementation plan (clearly indicating the chosen option(s) for meeting the new capital requirement and various activities involved with their timelines) no later than April 30, 2024.
The CBN also disclosed that it would monitor and ensure compliance with the new requirements within the specified period of grace.
The bank’s that fall under the category of those with International authorisation whose minimum capital base requirements is pegged at N500 billion are, First Bank, UBA, Zenith Bank, GTB, Access Bank, Fidelity Bank, Union Bank, Standard IBTC and Chartered Bank among others.
Those with national authorisation whose minimum capital base requirement will be N200 billion include,
Unity Bank, Polaris Bank and Sterling Bank among others.
The N50 billion is for banks domicile in states, like SunTrust Bank and newly opened Parallex Bank in Akwa Ibom State.
The new capital requirement is currently giving the bank’s concern given the current cash crunch in the industry.
Most banks in the past six months have been rationing cash they give to their customers.
Some major banks limit withdrawal at the counter to between ₦10,000 and N20,000.
Same at the ATM points, most of which have no cash to dispense, thereby leaving the banking public at the mercy of POS operators who give more than that at high charge.
For most customers, the cash crunch now bedevilling the banking industry, is a sad reminder of the days of Godwin Emefiele with his infamous Naira re-design that crippled the economy and brought untold hardship to many Nigerians.
The resultant effect is that most customers are now reluctant to deposit their money in banks thereby depriving them of operational cash.
The thinking of customers now is that they cannot access their money after deposit, prompting most to keep their money at home for easy access.
