Some banks capital adequacy ratio low – CBN report

Some banks with international authorisation have a capital adequacy ratio below the regulatory threshold.

The banking regulator disclosed this in its second economic quarter report on the financial soundness indicator.

The report said, “The banking industry remained resilient in the review quarter as key financial soundness indicators were within the regulatory thresholds. The banking system capital adequacy ratio fell by 3.0 percentage points to 11.2 per cent, relative to the 14.2 per cent recorded in the preceding quarter.

“The ratio was above the 10.0 per cent benchmark for banks with national/regional authorisation, but below the 15.0 per cent threshold for banks with international authorisation.

“The development reflected a decline in the banks’ total qualifying capital relative to the increase in risk-weighted assets due to the depreciation of the naira exchange rate, as a result of the adoption of a market-determined exchange rate policy by the Bank.”

It said the bank’s asset quality, measured by the ratio of non-performing loans, fell marginally by 0.4 percentage points to 4.1 per cent in the second quarter of 2023 from 4.5 per cent in the previous quarter, reflecting sustained improvement in loan recoveries by banks.

The ratio was below the prudential benchmark of 5.0 per cent. The industry liquidity ratio rose significantly by 10.9 percentage points to 62.2 per cent in the review quarter, compared with 51.4 per cent, recorded in the preceding quarter.

It added that the L was above the minimum regulatory benchmark of 30.0 per cent, showing the ability of the banks to meet their obligations.