Daily Independent Online.
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Wednesday, July 07, 2004.
CBN raises banks’ capital base to N25b
By Sanya Adejokun
Senior
Correspondent, Abuja
Banks
have been given an 18-month deadline to raise their capital base to N25
billion, up from N1 billion, a jerk of 2,400 per cent
The
new guidelines issued by the Central Bank of Nigeria (CBN) on Tuesday also
stated that managing directors of banks are now to personally sign monthly
returns to remove their common alibi of not being aware of what their
subordinates render to the regulators.
This
comes as the banks battle to beat the December 2005 deadline to attain the N2
billion minimum capitalisation requirement for old banks.
The
aim, according to CBN Governor Charles Soludo, is to force financial houses to
enter into mergers and acquisitions and come out bigger.
“As
at end-June 2004, there were 89 deposit money banks operating in the country,
comprising institutions of various sizes and degrees of soundness.
Structurally, the sector is highly concentrated, as the ten largest banks
account for about 50 percent of the industry’s assets/liabilities.
“Most
banks in Nigeria have a capitalisation of less than $10 million. Even the
largest bank has a capital base of $240 million compared to US$526 million for
the smallest bank in Malaysia”, Soludo told the meeting of the Bankers
Committee in Abuja on Tuesday.
Zenith
Bank Managing Director Jim Ovia and his First Bank counterpart Jacob Ajekigbe,
two of those whose banks are doing rather well, addressed a press conference at
the end of the meeting to say that “what is important is the end
result”.
They
explained that only one bank in South Africa - ABSA - is bigger
than all the 89 banks in Nigeria put together.
CBN
will no longer allow banks which do not meet the requirement to participate at
the Dutch Auction System or hold public sector deposits, and names of banks
that qualify would be published by December 31, 2005 in order to force
compliance.
Soludo
also told the bank executives that it has become compulsory for them to
personally append their signatures to returns to the authorities as the CBN has
developed zero tolerance in the regulatory framework, especially in data
reporting.
“The
so-called re-engineering or manipulation of accounts especially in hiding of
information under other assets/liabilities and off-balance sheets will henceforth
attract serious sanctions. Once it is false, the MD is going” a top CBN
official said in an interview in Abuja.
Also
among the 13-point agenda of the new governor is the promotion and enforcement
of dormant laws, especially those on the issuance of dud cheques and on the
vicarious liabilities of board members of banks in cases of failings by the
banks.
And,
dissatisfied with the penchant of banks to chase after government deposits at
the expense of the over N400 million outside the banking system, the CBN will
from this month begin a phased withdrawal of public sector funds from banks.
