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Concerns as Some Banks Show Signs of Weakness

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A Central Bank of Nigeria (CBN) stress test has shown that only large banks will stay above the regulator’s capital adequacy ratio threshold if the non-performing loans levels of the Deposit Money Banks should rise by 50 per cent.

 

The results of the stress test were contained in the CBN’s latest Financial Stability Report posted on its website on Thurday.

 

According to the report, the end-June 2017 banking industry stress test, which covered 20 commercial and four merchant banks, was conducted to evaluate the resilience of the banks to credit, liquidity, interest rate and contagion risks (shocks).

 

The banking industry was categorised into large banks (those with assets up to N1tn or above); medium banks (those with assets more than N500bn but less than N1tn); and small banks (those with assets up to N500bn or below).

 

The stress test results stated, “The stress test showed that only large banks could withstand a further deterioration of their NPLs by up to 50 per cent. However, none of the groups withstood the impact of the most severe shock of a 200 per cent increase in the NPLs as their post-shock CARs fell below the 10 per cent minimum prudential requirement.

 

“The impact of the severe shocks on the banking industry, large, medium and small banks will result in significant solvency shortfall of 15.21, 9.78, 93.42 and 17.53 percentage points from the regulatory minimum of 10 per cent CAR, amounting to N2.77tn, N1.54tn, N0.98tn and N0.25tn, respectively.”

 

According to the CBN report, the average baseline Capital Adequacy Ratios for the banking industry, large, medium and small banks at the end of June 2017 stood at 11.51, 13.13, -6.71 and 13.54 per cent, respectively.

 

These represented a decline of 3.27, 2.34 and 19.46 percentage points for the banking industry, large and medium banks, respectively from the position as at end-December 2016.

 

However, the small banks group grew by 10.40 percentage points from 3.14 to 13.54 per cent

 

The CBN said the decline in the CARs was attributable to the challenges in the oil and gas sector coupled with the slow recovery in the domestic economy, which resulted to a rise in the NPLs and capital deterioration.

 

In the sectoral credit concentration risk stress test, the breakdown of banking industry’s total credit by sector showed that, oil and gas sector accounted for 28.83 per cent of the industry credit, while manufacturing, general, information and communications, government and others accounted for 13.76, 8.82, 4.94, 8.53 and 35.12 per cent, respectively at end-December 2016.

 

The report added, “The results of the stress test of default in exposure to oil and gas sector showed that the banking industry and peered groups, with the exception of medium banks, withstood up to 20 per cent default as their post-shock CARs remained above 10.00 per cent – industry (10.74 per cent), large banks (12.30 per cent) and small banks (13.34 per cent).

 

“Under a more severe shock of 50 per cent default, only small banks had CARs above 10.00 per cent (12.30 per cent). This showed that banking industry, large and medium banks were more exposed to the credit risk in the oil and gas sector than the small banks.”

 

The CBN liquidity stress test showed that after a one-day run, the liquidity ratio of the industry declined to 31.5 per cent from the 48.1 per cent pre-shock position, and to 11.8 and 7.9 per cent after a five-day and cumulative 30-day run, respectively.

 

According to the report, the asset quality of commercial banks declined in the first half of 2017.

 

The ratio of the NPLs to gross loans increased by 2.2 and 4.3 percentage points to 15.0 per cent at end-June 2017 compared with the levels at end-December 2016 and end-June 2016, respectively.

 

In his reaction under the Governor’s Statement on the FSR, the CBN Governor, Godwin Emefiele, said, “Reflecting the recession in the first half of 2017, there was noticeable deterioration in banks’ loan portfolios, especially exposures to the oil and gas sector and foreign currency denominated credit.

 

“To maintain financial system stability, efforts have been intensified to proactively engage operators to effectively manage the associated risks. Also, a framework for the establishment of private asset restructuring companies to acquire non-performing loans from banks and other financial institutions will be released in due course.”

 

The Deputy CBN Governor, Financial System Stability, Dr. Joseph Nnanna, stated that the regulatory attention was currently focused on ensuring an improvement in the quality of banks’ assets as well as ensuring that the banks contribute effectively to the real sector.

 

“The disruptions experienced in the economy with declining oil prices and government revenue resulted in an increase in the non-performing loans in the banking industry. The CBN will continue to monitor developments and initiate measures to limit contagion and ensure that financial institutions remain safe and sound,” he added.

 

The results of the CBN’s stress test were in line with the Article IV Consultation report by the International Monetary Fund, which highlighted the risks the banking sector faced, particularly with regards to solvency ratios of “four small and medium-sized undercapitalised banks,” Afrinvest, a Nigeria-based investment and research firm, said in a research note.

 

It noted that some of the “small and medium-sized banks are kept afloat through continuous recourse to the CBN’s lending facilities”

 

The IMF report stated that banks needed to raise their capital buffers hence, the CBN’s directive on dividend payment was a welcome development, while also calling for a broad review of asset quality to unmask potential capital needs.

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E-Financial

Bankers, Criminals Collaborate to Clone ATM Cards- Police

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Dan Okoro, commissioner of Police, Anti-Fraud Unit, Federal Criminal Investigation Intelligence Department (FCIID) Ikoyi- Lagos, has raised alarm over many cloned certificates and ATM cards in circulation.

 

Okoro raised the alarm while briefing journalists in Lagos on the discovery of some cloned certificates by a syndicate, which specialised in printing fake documents of banks, government and corporate organisations.

 

He said that the syndicate had been using the cloned documents to defraud banks, government, corporate organisations and individuals, stressing that some bank officials were collaborating with the suspects for the crime.

 

Among documents cloned by the syndicate included CBN, presidential clearance certificates, IMF and court documents.

 

“I advise members of the public against cloned certificates, ATM card and other important documents currently in circulation. I want members of the public to keep their pin numbers, passwords and ATM safe.

 

“We have some documents recovered from one suspect arrested. We are investigating the documents and some bank staffers allegedly collaborating the syndicate.

 

“It is only the bankers that have details of every deposit in the bank. Our investigation revealed that some bankers give information to the syndicate on how much customers have in every account.

“The syndicate cloned documents and transferred such money to another account, particularly, accounts with ATM cards are their easiest target.

 

“Many crimes are going on in different banks, unfortunately, the bank management will not allow the public to know about it because they want to keep their customers trust,” he said.

 

Okoro said the unit was able to detect some of the documents through the assistance of a foreign cyber security firm based in Lagos using forensic analysis equipment to unravel the identities of the syndicate members.

 

He noted that cyber crime was a global challenge, stressing that the unit was synergising with the foreign firm for capacity building for officers and men in the unit.

 

The commissioner said the suspect arrested was currently in the hospital after he collapsed during search of his house and many incriminating materials, including hard drugs were discovered.

 

“The suspect is a web site designer. He designed many of the cloned documents. We are on the trail of other members of the syndicate,” Mr Okoro said.

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NSE Wins Best Use of Technology for Efficiency Award

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The Nigerian Stock Exchange (NSE) has announced that it received the 2018 Best Use of Technology for Efficiency Award from Nigeria Tech Innovation & Telecom Awards 2018 (NTITA).

The NTITA is the most celebrated industry awards for the Technology and Telecom industries attracting top decision makers in the sectors. The annual event is held to showcase excellence and celebrate the continued growth of Nigeria’s Information, Communication and Technology industry with a focus on the exceptional and innovative performance within the industry.

The award was presented by Mr Olusola Teniola, President, Association of Telecommunications Companies of Nigeria (ATCON) to the Chief Executive Officer of The Exchange, represented by Mr Olumide Orojimi, Head, Corporate Communications, NSE at ​NTITA  Award ceremony.

According to Mr Akin Naphtal, Chairman, Organising Committee of the awards ceremony, stated that the award is in recognition of NSE’s outstanding service, innovation and tireless efforts in the industry.

“We are proud to promote success stories, technology advancement and disruption in one of the most dynamic business sectors in Nigeria. Not only do we look at businesses, but also those who have made a genuine impact on the market from within these companies”.

Commenting on the award, Mr Bola Adeeko, Head, Shared Services Division, NSE, stated that, “we are very honoured to receive this award.

This achievement is a testament to the efficiency of our service offering which is underpinned by cutting edge technology. This award will spur us to continue to provide investors and businesses with a reliable, efficient and adaptable exchange hub in Africa, to save and to access capital”.

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Senate Orders Suspension of ATM Fee, Summons Emefiele

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Central Bank of Nigeria (CBN) has been told to direct all Deposit Money Banks (DMBs) operating in the country to suspend the monthly N50 they charge their customers for the maintenance of Automated Teller Machine (ATM) cards.

 

This was the resolution of the Senate on Wednesday after a lawmaker in the red chamber moved a motion on the illicit and excessive bank charges on customers’ accounts.

 

The Senate also directed its Committee on Banking Insurance and other Financial Institutions and Finance to conduct an investigation into the propriety of Automated Teller Machine card maintenance charges in comparison with international best practices.

The Senate decision was sequel to a motion sponsored by Senator Gbenga Ashafa, who expressed dissatisfaction with excessive charges by Nigerian Banks.

 

Ashafa lamented that most banks have deliberately manipulated their ATM machines not to dispense more than N10,000 per withdrawal in some cases and in most cases not more than N20,000 per withdrawal, adding this is deliberate ploy to manipulate the ATM machine.

 

According to him: “ost banks deliberately manipulated their ATM machines not to dispense more than N10,000 per withdrawal in some cases and in most cases not more than N20,000 per withdrawal at the ATM.

 

“This is a deliberate ploy to manipulate the ATM machine, which are ordinarily manufactured to dispense as much as N40,000 per transaction, in order to attract more bank charges from customers, who are forced to carry out more transactions due to the manipulated machines.”

 

Other Senator who spoke like Emmanuel Bwacha and Adeola Olamilekan kicked against excessive charges by Nigerian banks on Customers account with particular focus on the ATM.

 

The Senate also Mandated the committee on Banking to invite the Governor of Central Bank of Nigeria, Godwin Emefiele to appear before the committee in order to explain why the official charges as approved by the CBN are skewed in favour of banking institutions against ordinary customers to the banks.

 

In addition, the lawmakers Urged the Customer Protection Council to be up and doing in taking up the plight of ordinary Nigerians by looking into the various complaints of excess and unnecessary charges by Nigerian Banks.

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