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CBN Puts Banks Total Assets at N3trillion
From Ayodele Aminu and Kunle Aderinokun in Bauchi, 11.30.2004
The Central Bank of Nigeria yesterday disclosed that the total asset of the banking system stood at N3.22 trillion as at September 30, 2004, and was being controlled by four banks which accounted for 32.30 per cent of the entire asset. THISDAY checks revealed that the top four banks were First Bank of Nigeria Plc, Union Bank of Nigeria Plc, United Bank for Africa Plc and Zenith Bank Plc. Director, Banking Supervision, CBN, Ignatius Imala who disclosed this yesterday in Bauchi at the opening ceremony of the sixth CBN Seminar for Finance Correspondents and Business Editors, said the figure was an increase of 17.59 per cent in comparison with N2.740 trillion of the corresponding period in 2003. He added that the figure also represented a growth of 0.14 per cent over the sum of N3.209 trillion recorded as at half year-ended June 30, 2004. Similarly, he revealed that the aggregate deposit liabilities of the banking system for the review period was N1.756 trillion as against N1.518 trillion of the corresponding period in 2003, translating to an increase of 15.68 per cent. He also noted that record was a marginal decline of 0.17 per cent when compared with N1.759 trillion recorded as at June 30, 2004. The apex bank pointed out that the top four banks were responsible for 32.57 per cent of the total deposit liabilities. Imala who was represented by Director, Banking Supervision/Examination, Mr. A.M. Muhammed explained that the deposit liability was the major source of funding for the banking industry and accounted for 54.50 per cent of the industry’s total liabilities. Noting that capital and reserves contributed only 9.65 per cent of the total funding source of the banking industry, he explained that paid-up capital represented 4.13 per cent while reserves accounted for 6.18 per cent. Imala was spoke on “Structure and Performance of the Banking System” said the banking sector was characterized generally by small-size with a very high average cost with low capital base at an average which was less than $10 million or N1.3 billion. He stated that banks were heavily dependent on government patronage which constituted 20 per cent of its total deposit. He disclosed that, as at September 30, 2004, 15 banks are capitalized to the tune of less than N1 billion while only eight were between N1 billion and N1.5 billion. He added that nine of the nation’s banks were situated between N1.5 billion and N2 billion with significant number of 38 capitalised to the tune of between N2 billion and N5 billion. In addition, he said 11 others have their capital base hovering around N5 billion and N10 billion while seven banks operated with more than N10 billion capital base. Essentially, the director of banking supervision noted that, as at the end of September, 25 banks exhibited serious weakness manifesting as one or more of : insolvency/under-capitalisation; illiquidity; poor asset quality; dwindling earnings; weak corporate governance; low deposit base; board room squabbles and management crisis at one time or the other. However, he assured that the apex bank already put in place a contingency plan, which “exists as a blueprint for the prevention and management of systemic crisis in the banking industry.” He added that ìit provides indices that serve as warning signals regarding the safety of the industry.î These, according to him, “are used as minimum safety levels by supervisors for protection of the system.” He revealed that the contingency plan will be applied if 20 per cent and 15 per cent of the industryís asset and deposit respectively are held distressed banks in addition to when 35 per cent of the industry’s credit are classified as non-performing. He however, pointed that the ratios have not crossed the threshold for systemic distress as defined in the framework. But he said although the statistics are below the threshold, there exists genuine fears that the condition of the banking system may detriorate. The fear of further deterioration, he added, informed the recent reforms in the banking system which is anchored on a 13 point program, salient among which are: minimum capital base requirement of N25 billion, which must be met on or before December 2005; consolidation of banking institution through mergers and acquisitions; adoption of a risk-focused and rule-based regulatory framework; zero-tolerance for weak corporate governance, misconduct and lack of transparency; accelerated completion of the electronic Financial Analysis and Surveilance System (e-FASS); strict enforcement of the contingency planning framework for systemic banking distress; the establishment of an Asset Management Company.
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