CBN gives 3 banks June 2016 recapitalisation deadline

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CBN gives 3 banks June 2016 recapitalisation deadline

CBN gives 3 banks June 2016 recapitalisation deadline
November 21
07:00 2015

The Central Bank of Nigeria (CBN) has given three commercial banks until June 2016 to recapitalise after they failed to hit a minimum capital adequacy rate of 10 per cent. The apex bank in a report on its website, however, did not name the banks but said they were from the group of 14 in Africa’s biggest economy that have licenses to operate as regional and national lenders, with respective capital bases of 10 billion naira ($50 million) and 25 billion naira.
With a number of Nigerian banks having postponed moves to raise fresh funds, the central bank said it was monitoring the three lenders’ recapitalisation plans, and that 10 others with international status met the 15 per cent minimum capital rate for that category of banking at the end of June. The recapitalisation schedule, which contained the report dated October 30, only came to light yesterday.
Nigerian lenders have been shoring up their balance sheets in preparation for adopting stricter international requirements that analysts say could erode capital ratios by between 100 and 400 basis points to near the regulatory minimum of 15 per cent. Meanwhile, poor capital conditions at home due to slowing economic growth have weakened domestic markets, analysts say. Last week, the CBN told commercial lenders to double provisions on performing loans to two per cent to build adequate buffers against unexpected losses, as liquidity ratios fall.
It said lower revenues for government and oil companies due to plunging crude prices have led to unsecured exposures for banks that are likely to increase credit risk and loan losses. Rating agency, Moody’s said this week it expected non-performing loans (NPLs) to rise above five per cent but remain below 10 per cent over the next two years as the weaker naira increases the risk of dollar loans and suppresses bank capital, reports Reuters.
NPLs in Nigeria’s banking sector rose to 4.65 per cent at the end of June due to a fall in asset quality following devaluation of the naira and amid rising inflation, the CBN said in the report. Stanbic IBTC last week said it had doubled its nonperforming loan ratio to 8.8 per cent.
The Nigerian unit of South Africa’s Standard Bank, was also planning to raise fresh funds. Pan-African bank Ecobank and Nigeria’s Skye Bank have both suspended plans to raise fresh equity owing to weak market conditions and slower loan growth. Wema Bank, which suspended plans partly because of the naira weakness, said on Thursday it would resume a share sale next year and has started a process to raise $100 million worth of naira bonds after getting approval to switch from a regional to a national bank.

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