IN line with its Basel II implementation, the CBN has directed banks with a Capital Adequacy Ratio (CAR) less than 10 per cent to recapitalise by the first half(H1) 2016.
Recall that the CBN issued revised Guidance Notes on credit, market, and operational risks, regulatory capital, Pillar 3 disclosure requirements and the reporting template for submission of capital adequacy ratio returns, in June 2015. This is contained in a statement issued by the bank.
The review addressed challenges observed in the first year of Basel II implementation and clarified expectations from reporting institutions. Consequently, the reporting template for regulatory capital adequacy ratio was reviewed to incorporate changes to the Guidance Notes.
Among other things, the revised regulations and reporting requirements clarified the capital adequacy ratio requirement of 10 or 15 per cent for banks, based on a bank’s level of authorization or systemic significance; clarified the computation rules to ensure that banks do not recognize the regulatory risk reserve as a component of qualifying capital; and refined the computation rules for market risk exposures to take into account horizontal and vertical disallowances.
The revised Guidance Notes introduced a requirement for Pillar 3 disclosures to be published by banks on a bi-annual basis. The Guidance Notes further required D-SIBs to publish information on a more frequent basis in recognition of their level of business, international affiliations and other financial sector dynamics.
At end-June 2015, all the 10 banks with international authorization met the minimum capital adequacy ratio requirement of 15 per cent, while 3 out of 14 banks with national and regional authorization could not meet the minimum capital adequacy ratio of 10 per cent.
The affected banks were given up to June 30, 2016 to recapitalize. The efforts of these banks to implement their recapitalization plans are being monitored.
During the review period, 21 banks and two discount houses submitted reports on their Internal Capital Adequacy Assessment Process (ICAAP) while four banks that were involved in integration could not meet the June 30, 2015 deadline for submission.