CBN Denies Bank Failure Reports, Says Banks Are Well Capitalised

The Central Bank of Nigeria (CBN) has denied reports that three banks are in dire conditions and seven others are undercapitalized, saying the reports are false.
Breifing journalists yesterday at the end of the Bankers Committee meeting in lagos, Director of Banking Supervision of the CBN, Tokunbo Martins stated that the banks in the country are strong enough to absorb the losses that may arise from the non performing loans.
International rating agency, Moody’s and analysts at Dubai based investment firm Arqaam Capital in thier reports on Monday said Nigeria’s banking industry is experiencing a “full-blown financial crisis” with some banks facing insolvency.
Non performing loans in the industry had risen from 5.3 per cent as at the end of December 2015 to 11.7 percent at the end of June, way above the regulatory ceiling of five percent, according to the Financial Stability Report issued by the apex bank.
Martins while dispelling fears on the rising level of NPLs in the industry said the banks have the capital base to get absorb losses from the NPLs. “That certain banks are undercapitalized is certainly not true. That is not to say that the banking sector is not feeling the economic headwinds, so is every other jurisdiction so non performing loans at 11 per cent is not what we need to focus on.
“What we need to focus on is that do the banks have the capacity to absorb all the losses that will arise from those loans and the answer is that yes they do. They have very strong capital buffers. The banks have very huge capacity to generate income so apart from the capital buffers that they already have.
“They have huge capacity to generate income to absorb those losses if they do arise. And those NPLs can they perform, yes they can because the underlying assets are still there and they are good. I think we should totally dispell or ignore this kind of story, it’s not one that we should take seriously at all.”

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