CBN sets two year new minimum capital requirements for banks

The Central Bank of Nigeria, CBN has set a two year new minimum capital requirement for banks as part of moves to strengthen commercial and non-commercial bank in Nigeria.

The new requirement which was unveiled on Thursday, March 28, 2024, pegged minimum requirement capital base for commercial banks with international authorisation at N500 billion.

The Acting Director of the Corporate Communications Department, of CBN, Mrs Hakama Sidi Ali said the new minimum capital base for commercial banks with national authorisation is now N200 billion, while the new requirement for those with regional authorization is N50 billion.

Mrs. Sidi Ali also disclosed that the new minimum capital for merchant banks would be N50 billion, while the new requirements for non-interest banks with national and regional authorisations are N20 billion and N10 billion, respectively.

A circular signed by the Director, the Financial Policy and Regulation Department, Mr Haruna Mustafa, to all commercial, merchant, and non-interest banks and promoters of proposed banks emphasized that all banks are required to meet the minimum capital requirement within 24 months commencing from April 1, 2024, and terminating on March 31, 2026

According to the circular, the move, initially disclosed by the CBN Governor, Olayemi Cardoso, in his address to the Annual Bankers’ Dinner in November 2023, was to enhance banks’ resilience, solvency, and capacity to continue supporting the growth of the Nigerian economy.

To enable them to meet the minimum capital requirements, the CBN urged banks to consider injection of fresh equity capital through private placements, rights issues and/or offers for subscription; Mergers and Acquisitions (M&As); and/or upgrades or downgrade of license authorisation.

Furthermore, the circular disclosed that the minimum capital shall comprise paid-up capital and share premium only.

It stressed that the new capital requirement shall not be based on the Shareholders’ Fund.

“Additional Tier 1 (AT1) Capital shall not be eligible for meeting the new requirement. Notwithstanding the capital increase, banks are to ensure strict compliance with the minimum capital adequacy ratio (CAR) requirement applicable to their license authorisation.
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“In line with extant regulations, banks that breach the CAR requirement shall be required to inject fresh capital to regularise their position,” it added.

The CBN circular said the minimum capital requirement for proposed banks shall be paid-up capital, adding that the new minimum capital requirement shall apply to all new applications for banking licenses submitted after April 1, 2024.

It noted that the CBN would continue to process all pending applications for banking licenses for which a capital deposit had been made and/or an Approval-in-Principle (AIP) had been granted.

However, it said that the promoters of such proposed banks would make up the difference between the capital deposited with the CBN and the new capital requirement no later than March 31, 2026.

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Meanwhile, the CBN said all banks are required to submit an implementation plan (clearly indicating the chosen option(s) for meeting the new capital requirement and various activities involved with their timelines) no later than April 30, 2024.
The CBN also disclosed that it would monitor and ensure compliance with the new requirements within the specified timeline.