Following the inability of three prominent commercial banks to meet up with Central Bank of Nigeria.CBN, directive on 10% minimum capital adequacy rate, the apex bank has set a deadline of June 2016 for them.
Although CBN did not name the banks for fears that it might cause more pandemonium, it pointed out they were from the group of 14 banks that have licenses to operate as regional and national lenders, with respective capital bases of N10bn and N25bn.
Experts ascribed the inability of these banks to meet up due to fallouts in the implementation of the Treasury Single Account, TSA, by President Muhammadu Buhari. The initiative reportedly gulped over N2.5trn from commercial banks which according to former CBN governor Charles Soludo, was unhealthy for the economy.
Bank consolidation through mergers and acquisitions and the N25bn recapitalization exercise was one of the first items Soludo pursued in the banking industry while he was at the helm of affairs.
The policy stipulates that “Banks that do not meet the minimum paid up capital by end of each review or which remains un-sound/marginal would be liquidated.
- “By 1st January, 2005, after the close of the un-extended deadline, the program resulted to the shrinkage of the number of banks from 89 to 25 through mergers/acquisitions involving 76 banks which altogether accounted for 93.5% of the deposit share of the market.”
In 2011, Access Bank acquired Intercontinental Bank Plc; Eco bank acquired Oceanic Bank, while First City Monument Bank Plc acquired Finbank Plc among others.
In 2014, Heritage Bank acquired Enterprise Bank; the merger was completed two months back.
Post Nigeria gathered that if peradventure the forewarned banks do not meet up with the capitalisation process at the expiration of June 2016; such banks will either be bought by other banks, or transferred to the Asset Management Corporation of Nigeria, AMCON.
The implication in a long run is that depositors will be denied access to their accounts until the merger process of each of these banks is completed.
With hard kernels to crack, an analyst said “Poor capital conditions at home due to slowing economic growth have weakened domestic markets.”
Last week, the apex bank directed Nigeria’s deposit money banks to double provisions on performing loans to two percent to build adequate buffers against unexpected losses, as liquidity ratios fall.
Post Nigeria
No comments:
Post a Comment