Bank recapitalisation: Lawmaker fears recycling of illicit funds

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*Izunaso

The chairman, senate committee on capital market, Mr Osita Izunaso, has urged the Central Bank of Nigeria (CBN) to ensure that laundered funds are not used to recapitalise the banks.

The lawmaker said this in a statement while reacting to last Thursday’s new capital base regime for banks announced by the apex bank.

He called on the apex bank to ensure only fit and proper persons end up as significant shareholders.

Recall that the CBN had in a circular increased the new minimum capital base for commercial banks with international and national authorisation to N500 billion and N200 billion respectively.

The new requirement for commercial banks with regional authorisation was raised from N19 billion to N50 billion, representing 400 per cent increase.

Besides, the CBN approved N5 billion as new minimum capital for merchant banks while non-interest banks with national and regional authorisation were handed down N20 billion and N10 billion, respectively as new capital base requirements.

In a release, Izunaso commended the CBN for the recapitalisation programme, and assured of the support of his committee in ensuring its successful implementation.

He emphatically stated that the recapitalisation programme comes with unique risks especially when banks opt for the private placement option.

“This risk is minimised when banks go through the stock market, which offers a screening layer, in addition to that carried out by the CBN,” he stated.

He also said the adoption of tiered minimum capital requirements in respect of banks with international, national and regional authorisation was commendable, unlike the uniform capital base of N25 billion, which applied in the 2005 banking recapitalisation exercise.

He said recapitalisation will ensure a more safe, sound and stable banking system which will help strengthen the country’s financial system in general.

“This new Capital requirement is justified by the negative impact of naira depreciation on the capital base of banks over the years especially following the recent unification of exchange rates.

“The adoption of tiered minimum capital requirements in respect of international, national and regional authorisation is commendable unlike the uniform capital base of N25 billion which applied in the 2005 banking recapitalisation exercise,” he said.

He said in view of the strong link between the money and capital markets in Nigeria with most banks quoted on the Nigerian Exchange, the successful implementation of the exercise will have an impact on the capital market.

“I commend the CBN for the emphasis placed on injection of fresh capital for the purpose of meeting the minimum capital requirements as opposed to mere reliance on revenue reserves by the banks.

“Against the backdrop of the requirement to use only paid-up share capital and share premium for recapitalisation purposes, it is expected that most of the banks will approach the Stock market to raise additional funds either through an offer for subscription or rights issue.

“This has the potential to deepen the market, increase equities market capitalization as well as serve as a veritable source of Foreign Direct Investment with positive multiplier effects on the economy,” he said.