Cbn new deposit rule
You're referring to the new deposit rule introduced by the Central Bank of Nigeria (CBN)!
As of January 2023, the CBN introduced a new rule that requires all deposit money banks (DMBs) to maintain a minimum liquidity ratio of 27.5% of their total deposits. This means that for every N100 deposited, the bank must keep at least N27.50 as liquid assets, such as cash, government securities, and other highly liquid assets.
The main objectives of this rule are:
- Enhance financial stability: By maintaining a higher level of liquidity, banks will be better equipped to meet their short-term obligations and reduce the risk of insolvency.
- Improve risk management: The rule encourages banks to maintain a more conservative risk profile, reducing their exposure to high-risk assets and improving their overall risk management practices.
- Support economic growth: By increasing the availability of liquidity, banks will be able to provide more credit to the economy, supporting businesses and individuals.
The CBN has also introduced some exemptions and relaxations to the rule, including:
- Exemption for Tier 1 banks: Tier 1 banks (those with a minimum capital adequacy ratio of 10%) are exempt from the 27.5% liquidity ratio requirement.
- Relaxation for Tier 2 banks: Tier 2 banks (those with a minimum capital adequacy ratio of 8%) are allowed to maintain a liquidity ratio of 25% instead of 27.5%.
- Phased implementation: The rule will be implemented in phases, with the first phase focusing on the largest banks and subsequent phases targeting smaller banks.
Overall, the new deposit rule aims to promote financial stability, improve risk management, and support economic growth in Nigeria.