The banks mentioned in the CBN’s quarterly economic report are: 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.

They were scrutinised based on their capital strength and risk profile, a crucial measure of a bank’s financial stability.

The stress test was conducted to assess the banks’ financial health and ability to withstand adverse economic conditions or shocks.

The test specifically focused on the capital adequacy ratio (CAR), which measures the proportion of a bank’s capital to its risk-weighted assets and is used to determine the bank’s financial stability.

The CAR is a regulatory requirement set by the CBN and each bank is expected to maintain a minimum level of capital to ensure their ability to absorb potential losses.

Based on the results of the stress test, it has been revealed that among the eight banks with international authorisation, their capital adequacy ratio is lower than the minimum regulatory requirement set by the CBN.

This implies that these banks may have insufficient capital to meet potential losses during challenging economic conditions, which could potentially impact their overall financial stability.

The CBN’s revelation of the banks’ CAR falling below the minimum regulatory requirement highlights a concern regarding the financial strength of these banks and emphasizes the need for appropriate measures to be taken to address this issue.

It could prompt regulatory action such as requiring the affected banks to raise additional capital or implement strategies to strengthen their financial position, to mitigate any potential risks to the banking sector and overall economy.

The CBN’s 2021 guideline mandated banks to maintain a prudential Capital Adequacy Ratio of 10 per cent for National and Regional Banks, while banks with international authorisation were instructed to uphold a 15 per cent regulatory Capital Adequacy Ratio.

However, the recent report highlights a decline in the banking system’s Capital Adequacy Ratio, dropping by 3.0 percentage points to 11.2 per cent, notably below the 15.0 per cent threshold set for banks with international authorisation.

This decline in the banks’ CAR was attributed to a decrease in total qualifying capital relative to increased risk-weighted assets due to the naira’s depreciation following the adoption of a market-determined exchange rate policy. This reflects the challenges faced by these institutions.

The depreciation, stemming from the CBN’s managed float of the exchange rate in June 2023, significantly impacted banks, leading to substantial foreign exchange losses and affecting the required capital for international, national, and regional banks.

Speaking at the Chartered Institute of Bankers of Nigeria’s annual dinner, CBN Governor Olayemi Cardoso highlighted plans to introduce new capital requirements for banks.

Cardoso emphasised the industry’s strength under mild to moderate stress scenarios, as indicated by a stress test conducted on the banking sector.

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The Bank’s Profit Before Tax (PBT) showed an increase of 19% from N60.4 billion recorded during the same period in 2015. Profit After Tax (PAT) grew by similar margin from N48.1 billion in 2015 to N57.1 billion in 2016.

Access Bank Group’s unaudited nine-month results released to the Nigerian Stock Exchange (NSE) on Friday also showed Gross Earnings of N274.5 billion, up 7% from N257.6 billion in the corresponding period of 2015. The growth in gross earnings was driven by 17% increase in interest income on the back of continued growth in the Bank’s core business.

Similarly, the Bank posted 12% growth in operating income to N199.3 billion from N178.1 billion in 2015. Customer Deposits grew 25% to ₦2.10 trillion from ₦1.68 trillion in December 2015.

Access Bank’s Capital Adequacy Ratio (CAR) remained solid at 19% as at September 2016, well above the regulatory minimum.

Commenting on the result, Group Managing Director/CEO, Herbert Wigwe said, “Access Bank’s performance in the first three quarters of this year remained strong and consistent, reflecting a stable business with the capacity to deliver sustainable returns, particularly during a period underlined by significant macro headwinds.”

According to him, the Group maintained stable asset quality, recording NPL and Cost of Risk Ratios (CRR) of 2.1% and 0.9%, respectively.

“Our capital and liquidity position remained adequately above regulatory levels, as we continued to implement a disciplined capital plan, ensuring sufficient levels of profit retention to support our growth.

“In addition to capital enhancement, the recently concluded $300 million senior unsecured debt issue allows us optimise and enhance our foreign currency funding capacity whilst strengthening our balance sheet,” Wigwe added.

The Bank’s asset quality ratios also improved as the percentage of Non-Performing Loans (NPL) to total gross loans stood at 2.1% compared to 1.7% in December 2015. The NPL Coverage Ratio remained strong at 209.5% in the period, compared with 216.4% as at December 2015.

Further analysis of the result indicated that Cost to Income Ratio (CIR) improved 190bps y/y to 57.7% in the nine months of 2016 on the back of strong income growth during the period. Total Assets stood at N3.39 trillion, up 31% compared to N2.59 trillion in December 2015.

“We remain committed to our cost containment plan, as we strive to balance operational efficiency with earnings growth in a constrained environment.

“The Bank will remain resilient in the achievement of its strategic imperatives; maximizing our strong market position and solid capital base, while leveraging digital innovation to improve service touchpoints as we sharpen our retail play with emphasis on cheaper funding sources,” Wigwe noted.

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However, despite the 56.5% y-o-y increase in non-interest income to N131.0 billion, interest income declined by 7.3% y-o-y to N278.6 billion (Sept 2015: N300.4 billion).

Net-interest income
This improved by 5.2% y-o-y to N202.9 billion (Sept 2015: N192.9 billion), driven by a 38.4% reduction in interest expense on customers’ deposits to N56.7 billion (Sept 2015: N92.0 billion). This , according to the bank, was partly offset by a 7.3% decline in interest income, largely due to a 4.7% y-o-y drop in loans to customers to N193.0 billion (Sept 2015: N202.5 billion) due to tightening of its risk acceptance criteria, as well as 12.7% y-o-y decrease in interest on investment securities to N74.1 billion (Sept 2015: N85.0 billion).

Its cost of funds declined to 2.7% (Sept 2015: 4.0%) as we deliberately optimise our deposit mix in a rising interest rate regime. Average yields on customers’ loans, investment securities and loans to banks decreased to 12.9%, 9.0% and 2.9% respectively from 13.2%, 13.6% and 3.9% the year prior. Consequently, the blended yield on interest earning assets declined to 10.2% (Sept 2015: 12.1%) resulting in a net interest margin decrease to 7.5% (Sept 2015: 7.7%).

Non-interest income
Similarly, non-interest income (NII) increased by 56.5% y-o-y to N131.0 billion (Sept 2015: N83.7 billion) and currently contributes 39.2% to net revenue (Sept 2015: 30.3%). The increase in non-interest income has been driven largely by the foreign exchange translation gain as well as fees and commission income. Foreign exchange income in the period increased to N68.4 billion (Sept 2015: N22.5 billion), representing 52.2% of non-interest income (Sept 2015: 26.8%). Adjusting for foreign exchange income, non-interest income increased by 2.3% y-o-y.

Fees and commission
Fees and commission (F&C) income, representing 40.2% (Sept 2015: 60.9%) of total non-interest income, grew by 3.3% to close at N52.7 billion (Sept 2015: N51.0 billion).

This improvement was driven primarily by: a 22.2% increase in electronic banking fees to N15.5 billion (Sept 2015: N12.7 billion), a 109.2% increase in account maintenance fees to N11.3 billion (Sept 2015: N5.4 billion) as well as an increase in other fees and commission (+97.4%) to N6.1 billion. Electronic banking fees represented the highest component of F&C at 29.4% up from 24.9% in the prior year, with account maintenance fees accounting for 21.4% of F&C (Sept 2015: 10.6%).

Demonstrating the revenue synergies inherent in its business and enhancing the contribution to the non-interest income from the non-commercial banking businesses, net insurance premium further improved to N6.8 billion from N4.3 billion (+60.5%) in the prior year. Similarly, financial advisory and fund management fees from our merchant banking and asset management business increased by 95.1% and 93.2% respectively to N5.0 billion and N1.7 billion.

Operating expenses
Operating expenses declined by 5.1% y-o-y to N161.8 billion (Sept 2015: N170.4 billion) following broad range declines in: advert and corporate promotions (-51.0%, N3.5 billion) to N3.3 billion, operational and other losses (-59.4%, N3.3 billion) to N2.3 billion, maintenance (-10.8%, N1.5 billion) to N12.6 billion and regulatory cost (-4.9%, N1.1 billion).

The decline in operating expenses was however largely offset by staff costs (+4.6%, N2.9 billion) to N65.4 billion and to a lesser extent a 46.9% increase in net insurance claims to N2.9 billion following the crystallisation of some operational risks in the ordinary course of business.

Taking into consideration the current high inflation environment, a 5.1% overall reduction in operating expenses is a testament to our commitment to drive cost efficiencies and instil operational excellence across our businesses.

Cost-to-income ratio
Cost-to-income ratio improved to 48.4% (Sept 2015: 61.6%) following strong operating income growth and a sustained decline in operating expenses. We remain steadfast in achieving further efficiency gains as we consolidate our two-pronged objectives of efficiency and revenue optimisation. We have realized the current improvement largely by entrenching budget discipline, deployment of shared services framework, staff rationalization and other cost containment measures of the Group. There is scope for further progress as we continue to push ahead with a clear operational efficiency program including implementation of the Enterprise Resource Planning/Risk Management project.

Net impairment charge
Net impairment charge on credit losses came up to N114.7 billion (Sept 2015: N46.6 billion), primarily driven by incremental provisions from oil and gas sector.

Other sectors include construction, transport, general commerce and information services sectors. Consequently, Cost of risk increased to 6.9% (Sept 2015: 3.0%), while NPL ratio increased to 24.9%, largely driven by the translation effect of the Naira devaluation. We remain focused on remediation and recovery activities towards declassifying non-performing accounts and driving asset quality improvements.

Profit before tax
Profit before tax closed 3.5% lower y-o-y at N57.4 billion (Sept 2015: N59.6 billion). Income tax expense was N14.9 billion (Sept 2015: N9.3 billion), resulting in an effective tax rate for the period at 26.0% (Sept 2015: 15.7%). As a result, earnings per share of N1.56 (Sept 2015: N1.95), with post-tax return19 on average equity of 9.4% (Sept 2015: 12.2%) and post-tax return19 on average total assets of 1.2% (Sept 2015: 1.5%).

Total assets
Total assets increased by 21.6% y-t-d to N5.1 trillion (Dec 2015: N4.2 trillion) driven by: increase in loans to banks and customers as well as growth in investment securities.

Loans to banks and customers grew by 69.0% and 21.6% to N652.0 billion and N2.2 trillion respectively (Dec 2015: N385.8 billion and N1.82 trillion), while investment securities were up by 25.9% y-t-d to N1.2 trillion (Dec 2015: N970.2 billion). Total interest earning assets grew by 28.6% y-t-d to N4.1 trillion from N3.2 trillion, representing 80.6% of total assets (Dec 2015: 76.2%).

Total customer deposits
Total customer deposits rose by 10.9% y-t-d to N3.3 trillion (Dec 2015: N2.97 trillion). We are focusing on ensuring an appropriate deposit mix at the optimum price. Low-cost deposits now represent 69.1% of the Group’s total deposits, up from 67.3% as at December 2015.

Deposit growth was essentially driven by a 41.8% and a 9.4% increase in domiciliary and savings deposits respectively. Demonstrating the strength of our franchise and ability to continually attract a well-diversified and sustainable funding base, retail banking deposits within FirstBank(Nigeria) remain strong at 69.5% of total deposits (Dec 2015: 67.7%) as deposits in other business lines grew stronger y-t-d. Foreign currency deposits now represent 18.5% of the Group’s total deposits (Dec 2015: 14.5%) but 20.4% (Dec 2015: 17.8%) of the FirstBank(Nigeria) deposits at N516.1 billion.

Total loans & advances
Total loans & advances to customers (net) increased by 21.6% y-t-d to N2.2 trillion (Dec 2015: N1.82 trillion), driven largely by the translation effect of the Naira devaluation.

Due to the impact of the currency devaluation, FCY loans, as at 9M 2016 now constitute 51.8% of the loan portfolio (Dec 2015: 44.7%). The oil and gas sector accounts for 43.1% of the loan portfolio with oil upstream accounting for 21.9%, while downstream and services are 13.9% and 7.3% respectively.

The sectors largely affected by the devaluation are: oil and gas, manufacturing, power, and information technology. Adjusting for the movement in currency, real loan growth would have been flat y-t-d. Accordingly, the impact of devaluation on account of translation has essentially contributed to the growth in the non-performing loan book and the corresponding degree of provisions.

Concerted efforts are being made on reducing the FCY net portfolio in dollar terms. The matured foreign currency forwards reduced some of the FCY exposure. In dollar terms, y-t-d, the foreign currency net loans portfolio in FirstBank (Nigeria) declined by about $319 million.

We are also focusing on converting some of the FCY exposures, to curtail the technical growth and its attendant impact of the loan portfolio. A total of $85 million have been converted to Naira y-t-d.

Our priorities remain non-oil trades, short-cycle and self-liquidating transactions with preference in the retail and consumer lending sector in order to optimise portfolio mix, enhance portfolio yield, improve asset quality and enhance capital.

Shareholders’ funds
Shareholders’ funds closed at N624.6 billion, up 7.9% y-t-d (Dec 2015: N578.8 billion), benefitting from revaluation gains of N41.99 billion, taking foreign currency translation reserves to N50.1 billion (Dec 2015: N8.1 billion) as well as retained earnings of N52.56.6 billion, closing at N215.7 billion (Dec 2015: N163.2 billion).

Capital adequacy ratio
Capital adequacy ratio for FirstBank (Nigeria) closed at 15.4% (excluding 9M 2016 profit) (Dec 2015: 17.1%), while tier 1 ratio was 11.98% (Dec 2015: 13.3%). Capital adequacy ratio for FBN Merchant Bank closed at 28.9% (Dec 2015: 24.9%) above the 10% required by regulation, with a tier 1 ratio of 28.3% (Dec 2015: 24.4%).

Liquidity ratio
Liquidity ratio for FirstBank (Nigeria) closed at 54.3% (Dec 2015: 58.6%) not only in excess of the 30% regulatory mark, but also above 50% for most part of the year.

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Similarly, profit after tax rose by some 14.3 per cent to N10.3 billion due to a higher retention of organic capital compared to the previous period.

Non-interest income grew by 13.7 per cent from N25.7 billion in 2014 to N29.3 billion largely due to a 57 per cent increase in trading income. Confirming the efficiency of the lender’s management, operating expenses decreased by 1.9 per cent from N50.6billion to N49.7 billion.

Net interest income however, declined by 8.1 per cent from N43.0 billion to N39.5 billion, driven by an 18.5 per cent increase in interest expense resulting in a 630 basis points reduction in net interest margin to 48.9 per cent.

Commenting on these financial results, Yemi Adeola, the Managing Director/ Chief Executive, stated: “I am pleased to report that we sustained our performance from the previous year driven by an improvement in operating efficiency.

“Cost-to-Income Ratio improved by 140 basis points to 72.2%, Capital Adequacy Ratio stood at a record high of 17.5%, while liquidity buffers remained strong as the Bank grew its After Tax Profit by 14.3%.

“Clearly, our 2015 performance offered a clear validation of the underlying resilience of our business model. The very challenging operating environment notwithstanding, we managed to and continue to maintain a delicate balance between delivering on near term goals and laying the foundation for the future that we see – one where our customers enjoy the experiences that we create together, which in turn becomes the basis for our long term profitability.

“Asset quality remained resilient with Non-Performing Loans (NPL) below the maximum regulatory threshold of 5% despite a significant reduction in the loan book, arising from the replacement of state government loans with federal government bonds.

“We also maintained a very liquid balance sheet position despite the implementation of the Treasury Single Account (TSA) by the FGN. This outcome reflects some initial progress with the retail funding strategy and further supports the material investments that we are making in this area.

Commenting on the outlook for the 2016, Adeola observed that “We are of the view that the current macro-economic challenges present their own opportunities for agile and dynamic operators.

“We recognize that re-structuring of the sort that the current Federal Administration is pursuing takes time but like many other Nigerian businesses, we view the pursuit of economic self-reliance as commendable.

“Consequently, we remain optimistic for the future but are not under any illusion that the near term operating environment would be more favorable as we expect some policy volatility in the course of the year.

“There is clearly ‘a new normal’ and the future will belong to those who can develop new competences even while retaining the core strengths that have led them to success in the past. Our desire is to make Sterling Bank one of those”.

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Based on the strong financial results for 2015 and consistent with QNB Group’s aim of maximising returns to shareholders, the Board of Directors has recommended to the General Assembly, the distribution of a cash dividend of 35 percent of the nominal share value (QAR3.5 per share) and a bonus shares of 20 percent of the share capital (Two shares for every ten shares).

The financial results for 2015 along with the profit distribution are subject to Qatar Central Bank (QCB) approval.

The Group’s prudent cost control policy and strong revenue generating capability allowed it to maintain an efficiency ratio (cost to income ratio) of 21.5%, which is considered one of the best ratios among financial institutions in the region.

Total assets increased by 10.7% from December 2014 to reach QAR539 billion (USD147.9 billion), the highest ever achieved by the Group. This was the result of a strong growth rate of 14.8% in loans and advances to reach QAR388 billion ($106.7 billion).

The Group was able to maintain the ratio of non-performing loans to gross loans at 1.4%, a level considered one of the lowest amongst banks in the Middle East and Africa, reflecting the high quality of the Group’s loan book and the effective management of credit risk.

The Group’s conservative policy in regard to provisioning continued with the coverage ratio reaching 127% in December 2015.

At the same time QNB Group increased customer funding by 10.5% to QAR395 billion ($108.6 billion). This led to the Group’s loan to deposit ratio reaching 98%.

Total Equity increased by 7.1% from December 2014 to reach QAR62 billion ($17.0 billion) as at 31 December 2015. Earnings per Share reached QAR16.1 ($4.4) compared to QAR14.9 in December 2014.

Capital Adequacy Ratio (CAR) calculated as per the QCB and Basel III requirements stood at 16.3% as at 31 December 2015, higher than the regulatory minimum requirements of the Qatar Central Bank and Basel Committee.

The Group is keen to maintain a strong capitalisation in order to support future strategic plans.

To further enhance the shareholders equity and continue to maintain a capital adequacy ratio higher than the regulatory minimum requirements of the Qatar Central Bank and Basel Committee, the Board of Directors agreed to recommend to the General Assembly to approve the issuance of capital instruments that qualify as Tier 1 additional capital and/or Tier 2 capital instruments in accordance with Qatar Central Bank and Basel Committee requirements, and authorise the Board of Directors to determine the size, timing, pricing and other related terms and conditions.

As a result of the Group’s high credit ratings and outstanding asset quality, it was selected as one of the world’s 50 safest financial institutions by Global Finance.

Based on the Group’s continuous strong performance and its expanding international presence, QNB improved its ranking within the Brand Finance Global Top 500 Banking Survey 2015 and is now the biggest bank brand by value in The Middle East and Africa.

The QNB Ranking moved significantly from 101st (Brand Value: USD1.8 billion in 2014) to 79th (Brand Value: USD2.6 billion in 2015) further recognising QNB’s improved standing and strong brand recognition.

In December 2015, QNB Group entered into a definitive agreement with the National Bank of Greece for the acquisition of its entire stake comprising 99.81% in Finansbank A.Ş (Finansbank) in Turkey. QNB Group expects to finalise the transaction during the first half of 2016.

Also during the second half of 2015, QNB Group received approval from the Saudi Cabinet to open a branch in the Kingdom and the process of opening that branch has begun.

QNB Group is present, through its subsidiaries and associate companies, in more than 27 countries and 3 continents providing a comprehensive range of products and services. The total number of staff is more than 15,200 operating from over 635 locations and with an ATM network of more than 1,390 machines.

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CAR is the ratio of a bank’s capital relative to its credit, market and operational risks and financial regulators often keep an eye on it to ensure that banks can absorb a reasonable amount of losses.

It has also emerged that the total banking industry impaired loans or non-performing loans (NPL) increased by 16.36 per cent to N400.57 billion in August 2014 from N344.26 billion in August 2013, of which 66.84 per cent or N267.74 billion in loan loss provisions had been made by banks in the country.

However, the NPL ratio stood at 3.57 per cent as at August 2014, representing a decrease of 14 basis points compared with the corresponding period of August 2013.

The affected banks with low CARs, whose identities are yet to be disclosed, were said to have been engaged by the central bank and directed to recapitalise to meet the regulatory minimum.

In an update on the state of the economy and financial sector which was presented to the Bankers’ Committee last week, notwithstanding the worrisome condition of the two financial institutions, other Nigerian banks generally remained adequately capitalised with an average CAR of 17.75 per cent at the end of August 2014 compared to 18.1 per cent in August 2013, using Basel I capital adequacy framework.

CBN Deputy Governor, Economic Policy, Dr. Sarah Alade had attributed banks’ declining CAR largely to an increase in risk weighted assets as industry CAR under Basel II stood at 15.76 per cent as at August 2014.

According to the report, industry gross loans increased by 21.03 per cent to about N11.22 trillion in August 2014 compared to about N9.27 trillion in August 2013.

The CBN deputy governor said industry liquidity ratio declined from 50.6 per cent at the end of December 2013 to 42.6 per cent by the end of June 2014 due to the increased cash reserve requirement (CRR) imposed on banks.

However, all banks were said to have met the prudential minimum requirement of 30 per cent liquidity ratio which stood at 43.87 per cent as at August 2014, while total industry deposits grew by 5.94 per cent or N937.74 billion from N15,783.14 billion in August 2013 to N16,720.88 billion in August 2014.

In addition, the industry unaudited profit before tax decreased marginally by about 0.004 per cent from N385.68 billion for the period January to August 2013 to N385.67 billion during the period January to August 2014.

Also, the return on equity (ROE) among banks declined to 2.39 per cent in August 2014 compared to 2.63 per cent in August 2013, while return on assets (ROA) dropped to 20.36 per cent in August 2014 compared to 22.47 per cent in August 2013.

The report also showed that the federal government has so far collected the sum of N3.731 trillion this year including about N3.02 trillion from the monthly Federation Accounts Allocation Committee (FAAC) allocation, N113.63 billion came from value added tax (VAT), independent revenue (N452.04 billion), unspent balance (N120 billion) as well as balance in special account (N21.68 billion).

Meanwhile, as anxiety persists over declining crude oil prices, the CBN Governor, Mr. Godwin Emefiele, has said the central bank will unveil plans to support price stability in the coming weeks.

Also, following several requests by banks to extend credit facilities to the debtors of Asset Management Corporation of Nigeria (AMCON) and other obligors in the banking industry, the CBN has lifted the ban placed on this category of debtors.

Emefiele said this in Lagos weekend at the 2014 Chartered Institute of Bankers of Nigeria (CIBN) investiture ceremony where he was made an honorary fellow of the institute.

Emefiele, who said he was aware that crude oil prices had been dropping, a situation which he said presents some form of vulnerabilities to the country, assured Nigerians that both the fiscal and monetary authorities are taking measures that would ensure that the country withstands any likely shock on the economy.

“A number of actions would be unveiled in the next few weeks that both the monetary and fiscal authority would ensure that Nigeria continues to remain strong and healthy to support growth and development in Nigeria.

“Overall, price stability would remain the primary focus of the monetary policy in the short and medium term. With regards to the exchange rate, the major objectives of the bank’s policy have been ensuring stability in the value of the naira,” the CBN governor explained.

Emefiele described the theme of the event: “Making Nigeria a Major Destination for Foreign Direct Investment (FDI)”, as both timely and appropriate in today’s global economic and geopolitical environment.

He pointed out that in view of the fact that resources are usually less than a country’s needs, domestic savings are mostly never enough for the investment needed to put a country on a sustainable growth path.

“Given this scenario, countries around must compete, sometimes fiercely, to attract investments from abroad. Countries around the world must compete for it by creating an enabling environment to attract such investments.

“I believe that financial system and economic stability are at the core of this enabling environment. While there is always room for improvement, I believe that Nigeria has created such an environment and is continuosly striving to improve it,” he added.

According to the CBN governor, the central bank’s contribution to laying the foundation for a vibrant economy that would attract FDIs has been anchored on promoting policies that could sustain the country’s hard-earned macroeconomic stability.

He said Nigeria, which is now a leading destination for FDI in Africa, had received direct investment of over $67 billion between 2000 and 2013.

Emefiele added: “We have pursued a clear and consistent monetary policy that is guided by prevailing domestic monetary conditions, as well as developments in the global economy, particularly in the major advanced economies and our trading partners.

“Overall, price stability would remain the primary focus of the monetary policy in the short to medium term. We will continue to strive to build and maintain a healthy external reserves position.

“As we improve accretion to reserves and build fiscal buffers, we expect the naira to remain strong and give foreign investors the clarity and certainty that they need to guide future investment decisions.

“In the area of financial stability, we hope to sustain the effective management of potential threats and avoid a systemic crisis. The core of the bank’s vision is to effectively manage potential threats to financial stability and create a strong governance regime that is conducive for financial intermediation, innovative finance and inclusiveness.”

Meanwhile, the CBN which revealed the lifting of the ban on debtors in a letter addressed to all banks titled, “Guidelines for Processing Request from DMBs to Extend New/Additional Credit Facilities to Loan Defaulters and AMCON Obligors”, a copy of which was posted on its website yesterday, outlined conditions such category of bank customers must meet before they are granted fresh facilities by banks.

The letter was signed by CBN’s Director of Banking Supervision, Tokunbo Martins.

The central bank had in a circular on June 30, 2014 prohibited loan defaulters from further access to credit facilities in the banking system.

For AMCON obligors, the latest policy states that for any institution that had done a credit appraisal on the delinquent obligor and is desirous of extending a new facility to the obligor, should approach AMCON and obtain the value of the obligor’s Eligible Bank Asset (EBA) purchased by the corporation.

The institution is also expected to obtain from AMCON the terms of settlement reached between the obligor and AMCON, including a copy of the offer letter issued by AMCON upon restructuring of the facility and the current performance status of the obligors’ facility(ies) with AMCON and details of repayments so far made with dates.

In addition, the financial institution is expected to get the obligor’s good faith payment made (if any) and collaterals held, and a letter from AMCON expressing no objection (not guarantee) for the grant of the new/additional facility by the bank.

After obtaining AMCON’s no objection, the financial institution, according to the CBN, should write to the CBN seeking an exception for the obligor.

The letter is expected to be forwarded along with the following: the above information received from AMCON and AMCON’s letter of no objection (not guarantee) for the grant of the new/additional facility; details on the proposed additional facility; and the purpose of the facility.

“The institution’s request should include reasons advanced by the obligor for non-repayment of initial facility(ies) availed; details on how the new facility would positively impact on the obligor’s outstanding indebtedness to AMCON or on any other delinquent facility(ies); details of the collateral/credit risk mitigants proposed for the new facility and the level of perfection of title.

“This should also include valuation reports, from two independent valuers, indicating the open market value and forced sale value of the proposed collateral.

“The security/collateral should be distinct from whatever collateral is being held by AMCON for the EBA or where not different, details of agreements reached in this regard,” it stated.

For other categories of bank debtors, the central bank directed that institutions’ request to the CBN, should among other things, contain details of the proposed additional facility and the purpose of the facility.

In addition to the requirements for AMCON obligors and other delinquent obligors, the lending institutions are also expected to have met the minimum regulatory and internal economic capital adequacy ratio and liquidity ratio requirements for six months prior to the request; have a non-performing loan ratio not above five per cent in the last six months prior to the request; and the bank would be required to make a provision of 50 per cent on the loan from the onset of the loan, irrespective of performance status, and 150 per cent if for any reason the loan later turns out to be non-performing.

“After a review of the bank’s request, the CBN would either note the bank’s submission or decline. Institutions should be aware that the CBN’s position does not compel the bank to avail any facility to the obligor,” it added.

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A Capital Adequacy Ratio (CAR) audit of the banks by CBN showed that some have “high level of liquidity crisis”.

The report showed that only 16 banks have CAR above 15 per cent; five have CAR above 10 per cent, but less than 15 per cent. Also, an analysis of the report showed that a bank’s CAR is below 10 per cent but greater than five per cent. Another one’s CAR was below five per cent.

The report said the minimum ratio of capital to total risk-weighted assets shall remain 10 per cent for Regional and National Banks and International Banks, 15 per cent.

According to the CBN Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for 2012 -2013, the banks’lenders should maintain a higher level of capital commensurate with their risk profile.

The Financial Stability report showed that after a careful study of the liquidity stress test conducted on the banks at the end of June, last year, the CBN mandated them to carry out internal CAR audit at least once yearly to ascertain their liquidity positions. The results showed that the industry liquidity ratio fell to 16.7 and 13.3 per cent after the respective five-day and cumulative 30-day shocks were applied, from the pre-shock position of 67.8 per cent.

“The banking industry solvency stress test assessed the resilience of the industry based on historical worst case and hypothetical strained macroeconomic situations. The overall banking industry was resilient to liquidity shocks, though a few banks were found to be vulnerable.

“The diagnostic study earlier commissioned by the CBN to examine the Nigerian financial system, taking into account specific tools required in the light of international developments since the 2007 crisis, was completed in the period under review,” it said.

The report suggested the enhancement of existing supervisory tools and institutional arrangements based on three major components, namely: macro-prudential policy; micro-prudential policy, and crisis management, necessary for the achievement of financial stability in the country.

“Henceforth, banks are required to carry out their Internal Capital Adequacy Assessment Process (ICAAP) on an annual basis, as at December 31, and forward copies of the report to the CBN for review,” CBN Director Banking Supervision, Tokunbo Martins said.

According to her, the full adoption of Basel Accords will be executed by June but preliminary works would start this month. The Basel Accord is a financial analysis principle expected to give banks’ financials better credibility.

She said the policies specified approaches for quantifying the risk weighted assets for credit risk, market risk and operational risk for the purpose of determining regulatory capital.

According to her, the computations are meant to ensure that banks have sufficient high quality capital to support their risk taking activities. The lenders, she said, are also expected to establish effective risk management systems commensurate with their level of operations.

She said all banks and banking institutions are expected to adopt the basic approaches for the computation of capital requirements for credit risk, market risk and operational risk, adding that the adoption of the Standardised Approach for Operational Risk and other sophisticated approaches will however be subject to the approval of the apex bank.

“The guidance notes are applicable to all banks and banking groups licensed to operate in Nigeria and should be applied on a solo as well as a consolidated basis. The minimum capital requirement is retained at 10 per cent and 15 per cent for local and internationally active banks,” she said.

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