A circular issued by the Director of the Financial Policy and Regulation Department, Haruna Mustafa, to all commercial, merchant, and non-interest banks, as well as promoters of proposed banks, underscores the Central Bank of Nigeria’s directive to banks to meet the minimum capital requirement within 24 months, starting from April 1, 2024, and ending on March 31, 2026.
CBN spokesperson Hakama Sidi Ali confirmed the development in Abuja, stating that commercial banks with national authorization are now required to have a minimum capital base of ₦200 billion, while those with regional authorization must have ₦50 billion.
Additionally, the new minimum capital requirement for merchant banks is set at ₦50 billion, with non-interest banks with national and regional authorizations mandated to have ₦20 billion and ₦10 billion, respectively.
This announcement follows recent remarks by CBN Governor Olayemi Cardoso urging deposit money banks to expedite the recapitalization of their capital base to strengthen the financial system.
The last revision of capital base requirements occurred in 2005, during the tenure of former CBN Governor Charles Soludo, raising the minimum capital from ₦2 billion to ₦25 billion.
Mergers, Acquisitions Encouraged
To facilitate compliance with the new requirements, the CBN encourages banks to consider injecting fresh equity capital through private placements, rights issues, or offers for subscription. Other options include mergers and acquisitions, or upgrading or downgrading of license authorization.
The new minimum capital, as per the CBN directive, comprises paid-up capital and share premium only, excluding Additional Tier 1 (AT1) Capital. Banks are also reminded to ensure strict compliance with the minimum capital adequacy ratio (CAR) requirement applicable to their license authorization.
Any banks found in breach of the CAR requirement will be required to inject fresh capital to rectify their position, as stipulated in the CBN circular.
Implementation Plan and New Applications
All banks are instructed to submit an implementation plan, detailing their chosen options for meeting the new capital requirement, along with the associated activities and timelines, no later than April 30, 2024. The CBN will closely monitor and ensure compliance within the specified timeline.
For proposed banks, the minimum capital requirement shall be paid-up capital, with the new requirement applying to all new applications for banking licenses submitted after April 1, 2024. However, pending applications with a capital deposit or Approval-in-Principle granted will be processed accordingly.
Promoters of proposed banks are required to bridge the gap between the deposited capital and the new requirement by March 31, 2026.
Source: ChannelsTV