Banks Get Deadline To Recapitalise

The Central Bank of Nigeria (CBN) has given at least six banks deadline to beef up their capital base in line with the increased capital requirements under Basel II Capital Accord.

Reliable industry sources said many banks have not met the Basel 11 capital requirement and will need to raise additional capital to beef up their capital base within the next 12 months.

According to the sources, the apex bank has mandated the deficient banks to submit a recapitalization plan, outlining the timeline for their capital raising plan, to the apex bank 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 indicated to The Nation at the weekend 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. Besides, banks that are designated as systemically important banks (SIBs) are expected to make provision for additional 100 basis points to increase their minimum capital adequacy ratio to 16 per cent as against the general requirement of 15 per cent.

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.