The Central Bank of Nigeria (CBN) says eight deposit money banks designated Domestic Systemically Important Banks (D-SIB) accounted for N11.19 trillion or 71.47 per cent of the industry’s aggregate loans put at N15.68 trillion at the end of June 2016.
According to the CBN’s Financial Stability Report (FSR) posted on its website, the banks accounted for N20.42 trillion or 67.96 per cent of the industry’s N30.05 trillion total assets; and N12.94 trillion or 71.3 per cent of total deposits of N18.59 trillion.
There are 23 banks in Nigeria today and while the report did not name the eight banks considered D-SIBs, some of the biggest by deposit, loan book and asset base at the end of 2015, according to a special report published by Independent on Tuesday, August 16, are: First Bank, Zenith Bank, Guaranty Trust; Access Bank, United Bank for Africa, Diamond Bank, Ecobank Nigeria and Skye Bank.
The segregation, according to the report, follows “full implementation of the Framework for the Regulation and Supervision of D-SIBs and the assessment of banks that was carried out in the second half of 2015,” following which additional reporting requirements were put in place.
These included a directive that the banks “submit reports in the following areas: Risk Governance Strategies and Business Model, Capital Adequacy Ratio and Risk Weighted Assets, Liquidity Position and Funding Plan, Risk Management Practices encompassing credit risk, market risk, operational risk and other significant risks in their business models at specified intervals.”
The CBN noted that the identified banks complied largely with regulatory requirements during the period under review, with the exception of one bank (Skye) that had challenges over liquidity, capital adequacy ratio and non-performing loans.
“In line with the enhanced reporting requirements contained in the Framework for the Regulation and Supervision of D-SIBs, the eight banks designated as D-SIBs submitted their maiden Recovery and Resolution Plans (RRP) in the first half of 2016. The plans provided a menu of options that the D-SIBs would deploy to address severe financial stress. Based on the weaknesses observed in the RRPs, the Bank is developing guidance notes to provide clarity on regulatory expectations and ensure standardization across the industry,” the report added.
Also, as a pointer to the fact that all may not be well with the sector after all, the report said the ratio of non-performing loans to total loans jumped from 5.3 per cent at the end of December 2015, to 11.7 per cent at the end of June.
Just months ago, specifically in December 2014, the ratio stood at a princely 2.9 per cent, which was an improvement on the 3.5 per cent of June 2014.
Also, net Eligible Bank Assets (EBAs) managed by the Asset Management Corporation of Nigeria (AMCON) rose by 13.72 per cent from N1.53 trillion in December 2015 to N1.74 trillion at the end of June, due mainly to interest accumulation on the loans portfolio.
The corporation increased its pace of foreclosures and recoveries during the first half of 2016, recovering “N46.28 billion, reflecting an increase of 178 per cent of the total recovered during the second half of 2015. A breakdown of the recoveries showed that cash recoveries, share forfeitures, property forfeitures and claw-backs amounted to N24.5 billion, N1.3 billion, N20.25 billion and N190 million respectively.
“The sum of N120.08 billion was contributed to the Banking Sector Resolution Cost Trust Fund (BSRCTF) during the first half of 2016 from participating institutions based on their assets as at 31st December, 2015. The internal recoveries generated by AMCON as well as the contributions to the BSRCTF would be used to repay the Corporation’s debt obligations which fall due for payment in December 2016.”