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CBN raises banks
CBN raises banks’ capital base to N25bn
•Deadline Dec 2005
David Agba,
Abuja
CENTRAL Bank of Nigeria (CBN) yesterday
announced a new capitalisation of N25 billion for banks in Nigeria with expected
full compliance before end-December 2005.
The current capitalisation figure stands at N2 billion.
The apex bank’s Governor, Professor
Charles Soludo who dropped the hint of the enhanced rate, in Abuja during the
special meeting of the Bankers’ Committee, noted that the move was part of the
on-going economic reforms.
Professor Soludo who spoke on:
Consolidating the Nigeria Banking Industry to meet the Development Challenges of
the 21st century, noted that only banks that meet the requirement can hold
public sector deposits and participate in the Dutch Auction System (DAS) by end
2005.
According to him, the CBN will publish the
names of banks that qualify by 31 December 2005, even as there will now be
phased withdrawal of public sector funds from banks, beginning this month.
These positions were corroborated at a
joint news conference after the meeting by the Managing Director of Zenith Bank,
Mr. Jim Ovia and that of First Bank Plc, Mr. Moyo Ajekigbe, along- side
spokesman of CBN, Mr. Tony Ede, and the director of banking supervision of the
apex bank, Mr. Ignatius Imala.
They all agreed that the issue of mergers
and consolidation has become necessary to make the sector more efficient.
Mr. Ovia stated that the mandate of CBN
that banks should merge would be vigorously discussed after which their position
will be made known.
Ovia said: "it was also discussed, the
possibility of some incentives for banks that would achieve this target level on
or before March, 2005. It is expected that banks should start holding
discussions among themselves with the view to merging."
"It is expected that this will go a long
way in strengthening the financial sector. Examples have been given in other
parts of the world particularly the emerging market," he said.
The Zenith Bank boss cited Malaysia where
80 banks were reduced to 12 within a period of 12 months and where the capital
base is over $500 million (about N40 billion).
This, Mr. Ovia said, was well above what
was now put on ground as capital base requirement for Nigerian banks.
He also mentioned South Korea where 80
banks were consolidated to only eight within 12 months and that of South Africa
where a number of banks amalgamated to form Amalgamated Banks of South Africa (ABSA
bank) with a total asset base fair higher than that of all the banks in Nigeria.
Also speaking, Mr. Ajekigbe noted that
such changes were very necessary but difficult to adapt.
He, however, pointed out that it was good
for the economy as customers stand to gain in the long run when a few megabanks
with high capital base will guarantee the safety of depositors’ funds.
On his part, Mr. Imala, allayed fears of
customers that acquisition and mergers mean they would lose their deposits.
He disclosed that three banks had joined
the list of payment banks, totalling 75 participating banks on the clearing
house while 1,045,967 clearing items valued at N895 million passed through the
system.
Imala said the Bankers’ committee had
adopted some new decisions like the type of exposure that the banks will be
having in their books in terms of loans and advances.
He said "no single individual in Nigeria
should borrow from any bank more than ten per cent of shareholders’ funds of
that bank," adding that there should not be more than 800 per cent of large
exposures.
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