As part of its efforts at enhancing the quality of banks and ensuring financial system stability, the Central Bank of Nigeria, CBN, will announce new capital rules for banks this week.
The CBN had in 2014 ordered banks to boost minimum capital adequacy ratios to 16 per cent from 15 per cent to increase their resilience to shocks.
The new rules, which followed a banking crisis in 2008 and 2009 that nearly wiped out the industry, were scheduled to start on July 1, 2016.
The CBN’s Director of Banking Supervision, Mrs Tokunbo Martins, told Bloomberg that an announcement on the new date of implementation will be made by the end of the week.
“If the rules had to be implemented at the beginning of next month, it wouldn’t leave much headroom for proper lending,” she said.
According to her, the CBN plans to delay new capital rules for banks to boost lending and avoid a recession.
She said, “The regulator wants to postpone the rules because the sensible thing to do is reflate the economy and encourage lending.”
She explained that the capital adequacy ratio of banks declined to 16.6 per cent at the end of April from 17 per cent a year earlier as economic headwinds increased.
Martins added that the inability of manufacturers and oil companies to meet their obligations may result in an increase in loans not repaid for at least three months, which will also affect their capital base, the avenues for banks to make profit like before have reduced.
She stressed that the average ratio of non-performing loans for the banks rose to 10.1 per cent in April from below five per cent at the end of 2014, saying that the CBN is working to bring the ratio within the five per cent target by encouraging banks to improve their risk management and also grow capital organically.
“If you can’t raise capital in the capital market because of the economy, the other way to raise capital is to retain whatever you are making internally,’’ she said.
The CBN had in 2014 gave at least six banks deadline to ramp up their capital base in line with the increased capital requirements under Basel II Capital Accord.
According to reliable industry sources, many banks have not met the Basel 11 capital requirement and will need to raise additional capital to beef up their capital base.
The sources said the CBN has instructed the deficient banks to submit a recapitalization plan, outlining the timeline for their capital raising plan by June 2015.
The banks are expected to implement the recapitalization plan and complete their recapitalization plan by the end of June 2016.
A leading global investment and finance firm had recently stated that some 10 banks have been confirmed to have met the capital requirements under the Basel 11.
These included Access Bank, Diamond Bank, FBN Holdings, FCMB Group, Fidelity Bank, Guaranty Trust Bank, United Bank for Africa (UBA), Zenith Bank, Wema Bank and Skye Bank Plc.
While the capital adequacy ratio of most banks is generally above the minimum regulatory threshold of 15 per cent, the adoption of Basel II implies additional capital as banks grow their risk assets.
The Basel II is the second global standards of capital adequacy issued by the Basel Committee on Banking Supervision under the auspices of the Basel, Switzerland-based Bank for International Settlements, BIS, the oldest international financial organisation that coordinates central banks and standards for the international financial markets.
The Basel Committee has issued three sets of the global standards including Basel I, Basel II and Basel III, which increased and stricter capital risks and exposure management requirements from one level to another.