CBN Introduces New Minimum Capital Requirements for Banks
By Patience Ikpeme
The Central Bank of Nigeria (CBN) has announced a monumental increase in minimum capital requirements for all banks operating within the nation.
In a statement released yesterday in Abuja, Mrs. Hakama Sidi-Ali, the Acting Director Corporate Communications of the CBN, unveiled the new directives. The CBN aims to position banks to play a pivotal role in achieving the projected $1 trillion economy set forth by the Bola Ahmed Tinubu administration.
Under the new regulations, banks with international authorization will be mandated to maintain a minimum capital base of N500 billion, a tenfold increase from the previous requirement of N50 billion. Similarly, commercial banks with national authorization will see their minimum capital base raised to N200 billion, representing an eightfold surge from the previous N25 billion requirement. Banks with regional authorization will now need to maintain a minimum capital base of N50 billion, up from N10 billion, while merchant banks are required to have a minimum capital base of N50 billion.
Furthermore, the new guidelines stipulate that non-interest banks with national and regional authorizations must maintain minimum capital bases of N20 billion and N10 billion, respectively.
These changes are set to take effect on April 1, 2024, with a two-year grace period for compliance. Banks are mandated to meet the new capital requirements by March 31, 2026.
To facilitate compliance, the CBN has outlined various strategies for banks, including raising additional capital through private placements, rights issues, or public offerings. Additionally, consolidation through mergers and acquisitions (M&A) is encouraged as a means for banks to meet the heightened capital demands. Banks may also opt to downgrade or upgrade their licenses to align with their desired authorization level.
However, the CBN emphasizes that meeting the minimum capital requirement is only part of the equation. Banks must also maintain the minimum capital adequacy ratio (CAR) mandated for their specific license authorization. Failure to comply with the CAR could result in mandatory capital injections to rectify the bank’s position.
The new directives apply not only to existing banks but also to all new applications for banking licenses submitted after April 1, 2024. The CBN assures that pending applications will be processed, provided that capital deposits have already been made or an Approval-in-Principle (AIP) has been granted. However, promoters of these proposed banks must bridge the gap between their deposited capital and the new requirement by March 31, 2026.
The CBN has set a deadline of April 30, 2024, for banks to submit implementation plans outlining their chosen approach to meeting the new requirements and the timeline for each step. The regulatory body pledges to monitor banks closely to ensure compliance within the specified timeframe.
The decision to increase minimum capital requirements was informed by a comprehensive assessment of various factors, including the risk profile of banks, global and domestic economic challenges, inflationary pressures, and stress tests of banks’ balance sheets to assess their resilience to absorb shocks.
To safeguard against illicit financial activities, the CBN underscores its commitment to enforcing robust anti-money laundering regulations in collaboration with law enforcement agencies. Additionally, Fit and Proper checks will be rigorously conducted for all prospective and significant shareholders, directors, and senior management staff of banks.
In the event of a merger or acquisition, depositors’ accounts and funds will remain secure, with the acquiring institution assuming responsibility for all liabilities and obligations, including the protection of depositors.
