Commercial Banks’ Capital Adequacy Ratio Rises to 15.26% | Nigeria News
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Commercial Banks’ Capital Adequacy Ratio Rises to 15.26%

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The Central Bank of Nigeria (CBN) has disclosed that the Capital Adequacy Ratio (CAR) of commercial banks has improved from the 10.79 percent as at August 2018, to 15.26 percent as of December 2018.

Naija News understands that CBN’s Deputy Governor, Financial System Stability Directorate, Mrs. Aishah Ahmad, disclosed this in her personal comment in last month’s Monetary Policy Committee (MPC) meeting’s communiqué.

The apex bank attributed the development to recent promissory notes issued by the federal government to settle contractor debts, adding that liquidity ratios, return on asset and return on equity remained robust.

According to her, the marginal improvement in non-performing loans (NPLs) ratio was also expected to strengthen further.

CAR is a measurement of a bank’s available capital expressed as a percentage of its risk-weighted credit exposures.

The CBN requires that banks with international subsidiaries maintain CAR of 15 percent, while banks without international subsidiaries maintain CAR of 10 percent.

But the minimum requirement for the systemically important banks is 16 percent.

The central bank also plans to introduce new capital rules in the second quarter of 2019 that would be stricter about what sort of funding qualifies as capital.

The rules, which will align the banking industry with the international accord known as Basel III, also require lenders to create buffers that should help them in the case of a crisis.

Continuing, Ahmad explained: “Data provided by bank staff showed that the industry capital adequacy ratio increased considerably from 10.23 percent in December 2017 to 15.26 percent in December 2018.

“The improvement in capital buffers is a positive development, which will be critical should a downward trend in crude oil prices manifest given banks’ portfolio concentrations in the oil and gas sector.”


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