Cbn new capital requirement for commercial bank
The Central Bank of Nigeria (CBN) has introduced a new capital requirement for commercial banks in Nigeria. The new requirement is aimed at strengthening the banking sector and improving its resilience to economic shocks.
As of 2022, the new capital requirement for commercial banks in Nigeria is as follows:
- Minimum Paid-up Capital: N25 billion (approximately $65 million USD)
- Minimum Capital Adequacy Ratio (CAR): 15%
- Minimum Liquidity Ratio: 30%
The CBN has also introduced a new framework for calculating the capital adequacy ratio (CAR), which is based on the Basel II framework. The CAR is calculated as a percentage of the bank's risk-weighted assets (RWAs).
The new capital requirement is expected to improve the banking sector's ability to withstand economic shocks and reduce the risk of bank failures. It is also expected to promote stability and confidence in the financial system.
Here are some key highlights of the new capital requirement:
- The minimum paid-up capital of N25 billion is expected to improve the capital base of commercial banks and reduce their reliance on short-term funding.
- The minimum CAR of 15% is expected to ensure that banks maintain a sufficient level of capital to absorb potential losses and maintain their operations.
- The minimum liquidity ratio of 30% is expected to ensure that banks maintain a sufficient level of liquid assets to meet their short-term obligations.
- The new framework for calculating the CAR is based on the Basel II framework, which takes into account the credit risk, market risk, and operational risk of a bank's assets.
- The new capital requirement is expected to promote a culture of risk management and prudence in the banking sector.
It's worth noting that the CBN has given commercial banks a transition period to meet the new capital requirement. The deadline for compliance is December 31, 2023.