Regulatory Update: Increase In The Minimum Share Capital Requirements For Banks

Introduction

The Central Bank of Nigeria (CBN) recently unveiled the Banking Sector Recapitalization Programme 2024 (the "Programme") which mandates commercial, merchant, and non-interest banks to increase their minimum paid-in common equity capital before 31st March 2026. This marks the first increase since 2004 and aims to enhance the resilience, solvency, and stability of banks with the overarching goal of supporting the achievement of a US$1 trillion Nigerian economy by 2030.

Here, we highlight the new minimum capital requirements for the affected banks, recapitalization options available and key considerations and implications arising from the Programme.

New Minimum Capital Requirements (MCR)

The revised minimum capital requirements for commercial, merchant, and non-interest banks are detailed in the table below.

In assessing compliance with the new MCR by prospective banks, CBN will only consider Paid-up capital while for existing banks, the CBN will take into consideration the Paid-in capital (that is Paid-up plus Share Premium) only. As a result, bonus issues, shareholders' fund, other reserves, and Additional Tier 1 (AT1) capital will not be allowed or recognized for the purpose of meeting the new minimum capital requirements. Nonetheless, relevant reserves will continue to be recognized in the computation and determination of the risk-based Capital Adequacy Ratio (CAR) in line with the CBN's Guidelines on Regulatory Capital...

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Originally published by 22 April 2024

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