The Central Bank of Nigeria, CBN, has given three commercial banks until June 2016 to recapitalize after they failed to meet the minimum Capital Adequacy Ratio (CAR) of 10 per cent.
The Apex bank explained over weekend, that 14 banks have licenses to operate as regional and national lenders with respective capital bases of N10 billion ($50 million) and N25 billion, three of which were asked to raise fresh funds.
The Liquidity Stress Test was conducted by the CBN, which indicated that the capital position of ‘three small banks’ has fallen below regulatory capital requirement.
The test, contained on the CBN’s Financial Stability Report showed the Capital Adequacy Ratios (CARs) of the affected banks were below five per cent regulatory threshold. The three banks are not among the domestic systemically important banks (D-SIBs), it said.
The report, which measured the lenders’ positions as at June this year, showed that the number of banks with CAR less than five per cent, also increased from zero to three from December 31, 2014 to June 30, 2015. The CAR is a ratio of a bank’s assets to its risks
According to CBN’s Director, Financial Policy and Regulation Department, Kelvin Amugo, the liquidity stress test was conducted, using the Implied Cash Flow Analysis (ICFA) and the Maturity Mismatch/Rollover Risk approaches to assess the resilience of the banking industry to liquidity and funding shocks.