A liquidity stress test conducted by the Central Bank of Nigeria (CBN) has revealed that capital position of ‘three small banks’ have fallen below regulatory capital requirement.

The test, contained in the CBN Financial Stability Report released yesterday, showed the Capital Adequacy Ratios (CARs) of the affected banks were below five per cent regulatory threshold.

The three banks are not among the domestic systemically important banks (D-SIBs), it said.

The report, which measured the lenders’ positions as at June this year, showed that the number of banks with CAR less than five per cent also increased from zero to three from December 31, 2014 to June 30, 2015. The CAR is a ratio of a bank’s assets to its risks

According to CBN’s Director, Financial Policy and Regulation Department, Kelvin Amugo, the liquidity stress test was conducted using the Implied Cash Flow Analysis (ICFA) and the Maturity Mismatch/Rollover Risk approaches to assess the resilience of the banking industry to liquidity and funding shocks.

He said the ICFA approach assessed the ability of the banking system to withstand unanticipated substantial withdrawal of deposits, as well as short-term wholesale and long-term funding over a 5-day and cumulative 30-day periods, with specific assumptions on the fire sale of assets.

The report said liquidity ratio (LR) of the Nigerian banking industry decreased by 6.5 percentage points to 39.3 per cent from the 45.8 per cent December 2014 position. The decline in the LR position was driven mainly by the large and medium banks with 6.5 and 7.4 percentage points decrease respectively from their December 2014 LR position to 36.9 per cent and 45.5 per cent respectively. This decline may be traced to the sustained tight monetary policy stance of the CBN.

The test results revealed that the industry liquidity ratio declined to 9.30 and 6.10 per cent, from 39.3 per cent baseline position after the five-day and cumulative 30-day shocks, respectively. The result of the stress tests indicated potential vulnerability to liquidity risk in the event that these scenarios crystallized.

“Overall, there was an improvement in the baseline CAR of the Nigerian banking industry at end-June 2014 compared to the December 2014 position. The baseline CAR rose by 0.23 percentage point over the December 2014 position to 17.38 per cent at end-June 2015. This was driven mainly by improvements in the baseline CAR of the large banks which rose by 1.03 percentage points over their December 2014 position to 18.56 per cent at end-June 2015,” the report said.

“Equally, the number of banks with CAR greater than the 15 per cent prudential hurdle rate for international banks increased from 13 at end-December 2014 to 16 at end-June 2015. However, the number of banks with CAR less than five per cent also increased from zero to three over the period”.

Commenting on the report, CBN Governor, Godwin Emefiele, said it captures the headwinds remain, given that oil exports from Iran and lower global demand will further dampen oil prices, thus portending continued decline in oil revenue accruing to Nigeria.


http://thenationonlineng.net/three-small-banks-in-danger-says-cbn-after-stress-test/

Politics aside, all is not well with our economy..

Hmmm..... is it better to leave the country on its corrupt nature and let things glow or simply continue on this path of deliverance from our sharp practices. Everyone is really complaining

They didn't include the names of these 'three small banks'. The report is as good as useless IMO

They are more than 3 CBN...

Add WEMA, UNITY to that 3 abeg..

I did not read OP's post. I only scanned through the post, looking for the names of the three banks in question.(That is my main concern) but they were not listed. So?
I'm not concerned about the financial insitution's jargons, jare.

Babe2sure:
I did not read OP's post. I only scanned through the post, looking for the names of the three banks in question.(That is my main concern) but they were not listed. So?
I'm not concerned about the financial insitution jargons, jare.

seconded

tonjeola:
seconded

We can guess some of the banks. But one will be surprised that the banks we think are very liquid may be among.

you are on point

Babe2sure:



We can guess some of the banks. But one will be surprised that the banks we think are very liquid may be among.

Watching in 3D...

And the Banks are..................

Babe2sure:
I did not read OP's post. I only scanned through the post, looking for the names of the three banks in question.(That is my main concern) but they were not listed. So?
I'm not concerned about the financial insitution jargons, jare.

Abi o. What's the point of all that mumbo jumbo they posted up there if they can not reveal the banks in danger. Maybe they'll tell us the names of the banks after customers have lost millions in the liquidation process.

They should give us the names of the banks sharp sharp make person money no enter voice mail, If you no get work and bank come close with your chop money, na death be dat.

Just 3 banks?

dominique:


Abi o. What's the point of all that mumbo jumbo they posted up there if they can not reveal the banks in danger. Maybe they'll tell us the names of the banks after customers have lost millions in the liquidation process.

Na them sabi. Despite recapitalisation, they are giving us another story.
Maybe they want to rescue them first.

dominique:
They didn't include the names of these 'three small banks'. The report is as good as useless IMO

They will not name them because that will lead to a run on those banks with dire consequences for the sector.

Even without naming them, discerning industry watchers can figure out the identities of these banks. So, in a way, the damage has already been done, though minimal.

This is apart from a few CBN examiners who might have shared the gist discreetly with their close pals.

Mind you, the report is not useless as they are obligated to provide update on the state of the banking sector.

Cc: Babe2sure, imas, menix, davide470, lalasticlala

Adesiji77:


They will not name them because that will lead to a run on those banks with dire consequences for the sector.

Even without naming them, discerning industry watchers can figure out the identities of these banks. So, in a way, the damage has already been done, though minimal.

This is apart from a few CBN examiners who might have shared the gist discreetly with their close pals.

Mind you, the report is not useless as they are obligated to provide update on the state of the banking sector.

Cc: Babe2sure, imas, menix, davide470, lalasticlala

Well said!

dominique:


Abi o. What's the point of all that mumbo jumbo they posted up there if they can not reveal the banks in danger. Maybe they'll tell us the names of the banks after customers have lost millions in the liquidation process.

Lol. CBN never said the banks are in danger. It was an Industry wide test for the period under review (Dec. 2014 - June 2015) and 3 banks did not meet the CAR (Capital Adequacy Ratio) for that period. Just 6 months. Even the baseline CAR for the sector increased as seen in the attached screenshot.

That does not mean they are going under.. There are various tests and risk factors to be considered before saying a Bank would go under.

I think all these media houses should be careful how they post sensitive news.

cc: Adesiji77

davide470:
Lol. CBN never said the banks are in danger. It was an Industry wide test for the period under review (Dec. 2014 - June 2015) and 3 banks did not meet the CAR (Capital Adequacy Ratio) for that period. Just 6 months. Even the baseline CAR for the sector increased as seen in the attached screenshot.

That does not mean they are going under.. There are various tests and risk factors to be considered before saying a Bank would go under.

I think all these media houses should be careful how they post sensitive news.

cc: Adesiji77

Don't mind them. Our media houses now thrive on sensationalism. They want to sell newspapers at all costs.

They need to be cautioned..

*watching Naija's economy movie*

Babe2sure:
I did not read OP's post. I only scanned through the post, looking for the names of the three banks in question.(That is my main concern) but they were not listed. So?
I'm not concerned about the financial insitution's jargons, jare.

TYPICAL IRRESPONSIBLE JOURNALISM THAT ENCOURAGES CORRUPTION

THE ERA OF "NAMES WITHELD" MUST END

initiate:


TYPICAL IRRESPONSIBLE JOURNALISM THAT ENCOURAGES CORRUPTION

THE ERA OF "NAMES WITHELD" MUST END

Lol. Abi o. It is their stock-in trade.