Fear looms as eight commercial banks fail to meet CBN’s Capital Adequacy Ratio
There is currently a great deal of fear since, in a recent stress test, the Central Bank of Nigeria (CBN) revealed that eight commercial banks in Nigeria had not met their Capital Adequacy Ratio (CAR).
Access Bank Plc, Fidelity Bank Plc, First City Monument Bank Limited, First Bank of Nigeria Limited, Guaranty Trust Holding Company Plc, Union Bank of Nigeria Plc, United Bank for Africa Plc, and Zenith Bank Plc are among the banks mentioned in the CBN’s quarterly economic report.
The stress test assessed the banks’ capacity to withstand shocks or unfavorable economic conditions financially.
The disclosure follows weeks of reports that the CBN was considering a fresh wave of bank recapitalization.
The CBN published a recommendation in September 2021 directing banks to maintain a regulatory capital adequacy ratio of 15% for banks with international license, and a prudential capital adequacy level of 10% for national and regional banks.
The capital adequacy ratio of the banking sector, however, declined by 3.0 percentage points to 11.2 percent, which is significantly less than the 15.0 percent requirement established for banks with international license. This is indicated by the most recent report.
The CBN’s review of foreign exchange policies, which resulted in the devaluation of the Naira since June 14, 2023, is not unrelated to the development.
