N25b Capital: Chamber Seeks Stabilisation
By Crusoe Osagie
Lagos Chamber of Commerce and Industry (LCCI) has joined the call for the government to stratify banks into 3 categories with each having different capital base.
The President of the Chamber, Chief Olusola Faleye disclosed to newsmen in Lagos yesterday the position of the Chamber on the banking reform policy of the Central Bank of Nigeria (CBN)saying "banks in the country should be classified into small, medium and large banks with varying capital base ranging from N5billion to 25 billion"
He explained that the blanket application of the recapitalisation directive of the CBN to all the banks in the country may result in a situation where problems are created in the process of trying to solve other problems.
"Banks should be classified into three categories with different capitalisation requirements. The classification should be as follows: small banks with capital base of N5 billion, medium banks with capital base of N10 billion and large banks with capital base of N25 billion," he said
"The banks should be allowed to define their niche in accordance with their core competencies, subject to the guidelines by CBN on the scope of their operations," he added.
He said the current CBN monetary policy circular number 37 of 2004/2005 prescribes a ratio of 10 percent as against 8 percent that obtained in 2003.
"Based on the CBN Annual Report, majority of the Nigerian banks have a capital adequacy ratio of more than 10 percent, which is an indication that most banks operating in Nigeria are healthy on the score of capitalisation,"he said.
He said the 25 billion capitalisation requirements prescription has not taken account of the size of the economy and its absorbtive capacity, the level of savings and capital formation.
He said benchmarking Nigeria against other countries such as South Africa, Malasia and Korea is improper since our economy is not as large as their's.
He urged the CBN to place more emphasis on the capital adequacy in line with the global best practices on bank capitalisation.
Faleye explained that while the chamber supports the banking reform policy in principle, there was serious need for careful implementation of the policy to prevent a situation where banks, which are not doing badly are pulled down because of the tension that can result from careless implementation.
He however, stated that the real sector and the entire economy will be better off if the reform agenda for banks is carefully impemented since in essence it will result in stronger and bigger banks that can adequately support investment in the productive sector of the economy.
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