Home NewsBusiness News CBN raises capital base for mega banks to N500bn

CBN raises capital base for mega banks to N500bn

by Hafeestonova

Barely 48 hours after restating the need to increase the capital base of Deposit Money Banks for improved productivity, the Central Bank of Nigeria has announced new guidelines on its recapitalisation policy for banks in the country.

The new guidelines were disclosed in a statement signed by its Acting Director, Corporate Communications,  Sidi Ali, in Abuja on Thursday.

She said the apex bank had directed commercial banks with international authorisation to increase their capital base to N500bn and national banks to N200bn.

According to the acting CBN director, commercial banks with national licences must meet a N200bn threshold, while those with regional authorisation are expected to achieve a N50bn capital floor.

Similarly, non-interest banks with national and regional authorisations will need to increase their capital to N20bn and N10bn, respectively.

The CBN’s move came two days after the Monetary Policy Committee hinted that it would change the capital base of the nation’s banks.

At the press briefing that followed the 294th MPC meeting on Tuesday, the CBN Governor, Olayemi Cardoso, urged DMBs to expedite actions to increase their capital base to strengthen the financial system against potential risk.

In its meeting, the committee noted that to guard against risk, commercial banks in the country should accelerate their recapitalisation efforts.

Cardoso said, “The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable. The committee thus called on the bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macro-potential guidelines.

“The MPC also enjoined the banks to expedite actions on  recapitalisation to strengthen the system against potential risks in an increasingly globalised world.”

However, the latest CBN policy directive specifies that commercial banks with international authorisation are now required to shore up their capital base to N500bn.

The current capital base is stratified based on the type of banking licence – banks with regional, national, and international licences are currently expected to maintain the minimum capital bases.

The proposed increase in the capital base comes nearly two decades after the CBN’s 2004 banking reform, which increased the then-prevailing capital base from N2bn to N25bn.

The 2004 banking reform was characterised by massive mergers and acquisition activities, ultimately reducing the number of banks in the country from 89 to 25.

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