On filed recapitalization plans, banks are awaiting the CBN’s decision

The capitalization plans of banks are presently being examined by the Central Bank of Nigeria (CBN) to see if they align with the overall goals, schedules, and overall market conditions.

Banks were given until April 30, 2024, by the apex bank, to submit their recapitalization plans. These plans required to include a detailed description of the procedures, transactional information, tools, and other choices that would be used to achieve the new minimum capital base for each license category. The two-year compliance period that ends on March 31, 2026, is covered by the plans.

Several sources yesterday attested to the fact that the apex bank had begun comprehensive evaluations of the recapitalization plans that the banks had filed. This evaluation process will ascertain whether the apex bank will approve the plans or request further information and plans from the institutions that will be affected.

Three main alternatives are available to banks under the CBN recapitalization framework: mergers and acquisitions, upgrading or downgrading license authorization, and fresh equity capital infusion.

In contrast to the prior use of shareholder funds, CBN adopts a unique definition of the new minimum capital base for each category of banks in the continuing recapitalization process. This definition includes the inclusion of share capital and share premium. Many banks fall well short of the new minimum definition in terms of share premium and capital, even while their shareholders’ funds exceed the new minimum capital basis.

Sources claim that following the current review, the CBN would notify the banks of its “no-objection” clearances or, in the event of a detected weakness, request a backup plan.

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According to a source, while the banks are permitted to take general preparatory actions in connection with the recapitalization exercise, the full implementation of the plans will only begin following the apex bank’s final approval and endorsement of the banks’ proposals.

Five essential criteria have been developed by the top bank’s committee of specialists, according to sources, to assess the plans.

These included timeliness, market competitiveness, clarity, practicality, and overall compliance.

According to the sources, the CBN’s team is generally looking to see how the outlined roadmap will take each bank to the desired level of capitalisation by the March 31, 2026, especially given the known facts and market position of the bank as well as expected market situations in the Nigerian and international capital markets.

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