New Capital Base: Don't Adopt Uniform CRR for Banks, Expert Urges CBN

A financial expert and Director, Institute of Capital Market Studies (ICMS), Nasarawa State University, Keffi (NSUK, Prof. Uche Uwaleke has admonished the Central Bank of Nigeria (CBN) to adopt a differentiated

Cash Reserve Ratio (CRR) for various categories of banks instead of a uniform rate (currently at 45 per cent) for commercial banks.

CRR is the portion of the cash that the CBN asks respective commercial banking institutions to keep aside and not use for lending or investment purposes.

His admonition is coming amid the apex bank's newly-proposed N500 billion and N200 billion capital base for commercial banks with international and national authorisation, respectively,

The CBN had via a circular, last Thursday

urged the banks to consider injecting fresh equity capital through private placements, rights issues and/ or offers for subscription; mergers and acquisitions (M&As); and/or upgrade or downgrade of licence authorisation to enable them to meet the new capital requirements.

All fresh capital requirements are to be satisfied by March 31, 2026.

Reacting to the new development in a statement to THISDAY, Uwaleke, a former finance commissioner in Imo State applauded the CBN for the step.

He said: "It is a welcome development that will help strengthen the country's financial system and a potential boost to the stock market

"In view of naira devaluation following unification of exchange rates, the new caliberated minimum capital requirements seem OK unlike the uniform capital base of N25 bn stipulated in 2005.

"Shareholders' funds comprise Paid up share capital plus reserves.

"If my memory serves me right, this was permitted in 2005 but now disallowed possibly from the experience of the last exercise.

"I believe the FUGAZ (FBN, UBA, GTB, Access and Zenith) banks with international authorisation will have no difficulty meeting this requirement.

"The stock market (Option 1) presents the most feasible option as few will likely go the M&A (Mergers and acquisitions) route

"Access Bank has already announced it is raising N365 billion via Rights issue.

"I also think the two years period allowed is sufficient to implement recapitalisation."

According to him, a number of banks including FBN, Access and Fidelity had already commenced the process of recapitalisation before now, especially since the CBN Governor made the announcement in November last year.