April 06, 2017

Should We Be Worried? 3 Nigerians Banks In Financial Trouble

*CBN’s stress test shows gives negative signal
The Capital Adequacy Ratios (CARs) of three big banks have fallen below regulatory capital requirement, the result of stress test conducted by the Central Bank of Nigeria (CBN) on the status of the banking system has shown.

Overall, the result of the solvency stress test indicated the potential for high contagion risk through unsecured interbank exposure as three banks including two Systemically Important Banks failed CAR after a 100 per cent default shock.

The test, contained in the Financial Stability Report, released yesterday by the CBN governor, Godwin Emefiele, classified lenders into three groups: large banks, those with assets greater than or equal to N1 trillion; medium banks with assets greater than or equal to N500 billion but less than N1 trillion and small banks with assets of less than N500 billion.

The CAR is a ratio of bank’s assets to its risks and is 10 per cent for national banks and 15 per cent for banks with international subsidiaries and 16 per cent for Systematically Important Banks (SIBs). It said the baseline CAR for the banking industry, large, medium, and small banks stood at 14.78, 15.47, 12.75 and 3.14 per cent, respectively.

The banking industry stress test was carried out at end-December last year, covering 23 commercial and merchant banks, and evaluated the resilience of the banks to credit, liquidity, interest rate and contagion risks.

The tests, which measured the lenders’ positions as at December last year, were conducted using the Implied Cash Flow Analysis (ICFA) and Maturity Mismatch/Rollover Risk methods, to assess the resilience of individual banks and the banking industry to both liquidity and funding shocks.

It revealed that after a one-day run, the liquidity ratio for the industry would decline to 30.2 per cent from the 44.4 per cent pre -shock position and, to 9.73 per cent and 6.76 per cent after a five-day and cumulative 30-day run, respectively.

Similarly, a five-day and cumulative 30-day run on the banking industry would result in liquidity shortfalls of N2.1 trillion and N2.3 trillion, respectively.

The test showed that commercial banks experienced deterioration in assets quality at end-December 2016. The ratio of non-performing loans (NPLs) to gross loans deteriorated by 2.3 and 8.7 percentage points to 14 per cent compared with the levels at end-June 2016 and end-December 2015, respectively.

The deterioration in asset quality, the report said, was largely attributed to the rising inflationary trend, negative Gross Domestic Product (GDP) growth, and the depreciation of the naira.

The CBN said economic crisis adversely impacted borrowers, resulting in rising NPLs which required additional provisioning by banks, thereby reducing the banks’ CAR.

CBN, please make sure our money in the banks are safe.

17 comments:

Sunshow said...

Abeg ooooo

swift said...

nawa oooo

Rosemary Ezeji said...

CBN pls don't give people heart attack.

abdulrasaq abdulrafii said...

We are going back to save our money in port no wonder no much money on ground to pay for catch crops like cocoa and palm kernels

godwin progragrammer said...

hmmm. nawaoo

inumidun said...

Serz gbege..

Austine Gabriel said...

My bank is not among the three

Anurika Onwu said...

This is seriously a big one

Hassan Aderemi said...

CBN should ensure depositors money is safe, they can inject funds into the trouble banks & possibly change the management to sanitise the system.

Ay360 said...

I beg oooooo

Onifade Joseph said...

How deep is the shit, and can you please give us their names, so we can adjust or probably try front
#Believe

Uyi Osamwonyi said...

I trust Skye Bank is number one,pls name the remaining two...

I. C Bruno said...

Lies

Anonymous said...

Useless big grammars.
Wetin be banks names?

Queen Abiodun Ogunnika said...

Yes o they should be named

Queen Abiodun Ogunnika said...

Tell us the names of the banks abeg

okorochas justin said...

We ought to be...

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