The CBN sets a ₦500 billion minimum capital base for banks

Apr 16, 2024 | International | 0 comments

The Central Bank of Nigeria (CBN) has introduced new minimum capital requirements for banks, setting the minimum capital base for commercial banks with international authorization at ₦500 billion.

In a circular addressed to all commercial, merchant, and non-interest banks, as well as promoters of proposed banks, the Director of the Financial Policy and Regulation Department, Haruna Mustafa, outlined that banks must meet the minimum capital requirement within 24 months, starting from April 1, 2024, and ending on March 31, 2026.

CBN spokesperson, Hakama Sidi Ali, confirmed the announcement in Abuja on Thursday.

Under the new guidelines, the minimum capital base for commercial banks with national authorization has been raised to ₦200 billion, while those with regional approval must maintain a minimum capital base of ₦50 billion.

Furthermore, the minimum capital requirement for merchant banks has been set at ₦50 billion. For non-interest banks with national and regional authorizations, the new requirements are ₦20 billion and ₦10 billion, respectively.

This development follows recent comments by CBN Governor Olayemi Cardoso, urging deposit money banks to expedite the recapitalization of their capital base to fortify the financial system.

Last November, Cardoso, who assumed office two months earlier, had indicated that commercial banks in Nigeria would be directed to bolster their capital base to support President Bola Tinubu’s ambition of achieving a $1 trillion economy.

The last revision of bank capital requirements occurred in 2005, during the tenure of the current Anambra State Governor, Charles Soludo. The capital base was increased from ₦2 billion to ₦25 billion.

To meet the new capital requirements, the CBN advised banks to consider various options, such as injecting fresh equity capital through private placements, rights issues, mergers and acquisitions, or upgrading/downgrading license authorization.

The new minimum capital shall comprise paid-up capital and share premium only, excluding Additional Tier 1 (AT1) Capital. Banks must ensure strict compliance with the minimum capital adequacy ratio (CAR) requirement applicable to their license authorization.

All banks are required to submit an implementation plan detailing their chosen option(s) for meeting the new capital requirement and associated activities by April 30, 2024. The CBN will monitor and ensure compliance within the specified timeline.

For proposed banks, the minimum capital requirement shall be paid-up capital. This requirement applies to all new applications for banking licenses submitted after April 1, 2024. However, pending applications will be processed, with promoters required to bridge the gap between deposited capital and the new requirement by March 31, 2026.

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