Banking And The Law - 2. Regulatory Issues

2.1. CAPITAL ADEQUACY

2.1.1. MINIMUM PAID-UP CAPITAL

The Head of State, on the recommendation of the Central Bank, from time to time, determines the minimum paid-up share capital of each category of banks. The minimum paid up capital requirement for both commercial and merchant banks has recently been increased to N500 million, approximately US$6.25 million. Existing banks are to meet this requirement over a transitional period of two years, expiring 31st December, 1998. Banks which fail to meet the requirement by that date shall have their licences revoked, while new banks shall comply fully with that condition before they are licensed.

2.1.2. MAINTENANCE OF RESERVE FUND

In addition, every licensed bank is required to maintain a reserve fund out of the net profit of each year, (after due provision is made for taxation) and before any dividend is declared. Where the amount of the reserve fund is less than the paid-up share capital of the bank, it shall transfer not