CBN Unveils New Minimum Capital Requirements, Gives Banks 24 Months to Recapitalise
Days after prompting Nigerian banks to speed up action on the recapitalisation of their capital base in order to reinforce the monetary system, the Central Bank of Nigeria (CBN) on Thursday, revealed brand-new minimum capital requirements for banks, pegging the minimum capital base for business banks with global authorisation at N500 Billion.
Validating this in Abuja, the Acting Director, Corporate Communications Department, Mrs. Hakama Sidi Ali, stated the brand-new minimum capital base for business banks with nationwide authorisation is now N200 Billion, while the brand-new requirement for those with local authorisation is N50 billion.
Mrs. Sidi Ali likewise revealed that the brand-new minimum capital for merchant banks would be N50 Billion, while the brand-new requirements for non-interest banks with nationwide and local authorisations are N20 Billion and N10 Billion, respectively.
A circular signed by the Director, Financial Policy and Regulation Department, Mr. Haruna Mustafa, to all business, merchant, and non-interest banks and promoters of proposed banks stressed that all banks are needed to fulfill the minimum capital requirement within 24 months beginning from April 1, 2024, and ending on March 31, 2026
According to the circular, the relocation, at first divulged by the CBN Governor, Olayemi Cardoso, in his address to the Annual Bankers’ Dinner in November 2023, was to improve banks’ strength, solvency, and capability to continue supporting the development of the Nigerian economy.
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To allow them to satisfy the minimum capital requirements, the CBN advised banks to think about inject fresh equity capital through personal positionings, rights problems and/or deals for membership; Mergers and Acquisitions (M&A s); and/or upgrade or downgrade of license authorisation.
The circular divulged that the minimum capital will make up paid-up capital and share premium just. It worried that the brand-new capital requirement will not be based upon the Shareholders’ Fund.
“Additional Tier 1 (AT1) Capital will not be qualified for fulfilling the brand-new requirement. Regardless of the capital boost, banks are to guarantee stringent compliance with the minimum capital adequacy ratio (CAR) requirement appropriate to their license authorisation.
“In line with extant guidelines, banks that breach the CAR requirement will be needed to inject fresh capital to regularise their position,” it included.
The CBN circular stated the minimum capital requirement for proposed banks will be paid-up capital, including that the brand-new minimum capital requirement will use to all brand-new applications for banking licenses sent after April 1, 2024.
It kept in mind that the CBN would continue to process all pending applications for banking licenses for which a capital deposit had actually been made and/or an Approval-in-Principle (AIP) had actually been given. It stated that the promoters of such proposed banks would make up the distinction in between the capital transferred with the CBN and the brand-new capital requirement no later on than March 31, 2026.
The CBN stated all banks are needed to send an execution strategy (plainly showing the picked choice(s) for fulfilling the brand-new capital requirement and different activities included with their timelines) no later on than April 30, 2024.
The CBN likewise revealed that it would keep an eye on and guarantee compliance with the brand-new requirements within the defined timeline.