A circular issued on Wednesday, by Agnes Martins, the CBN Director of Banking Supervision, said the directive aims to make banks avoid the risk of not meeting the capital base requirements of their host country.
The circular stated that the apex bank will restrict the parent banks from providing the offshore subsidiaries with the funds required to increase their capital base.
The offshore subsidiaries that can raise the money unilaterally will be allowed to continue doing business in their host countries, while those that cannot, will be compelled to close shop.
“The CBN has noted with concern the incessant demands on Nigerian banks by the various host regulators for the recapitalisation of foreign subsidiaries,” stated Martins. “These demands have exerted enormous pressure on the capital base of most parent banks due to the lull in the capital market, making it difficult to raise capital, diminishing profit margins and increasing competition.
Nigerian banks with foreign subsidiaries are required to submit, within 60 days of the date on this letter, recapitalisation plans in anticipation of regulatory capital increases under BASEL II and III and any other unforeseen increase by host countries.”
The policy will hit UBA and Access Bank hard as they are the two banks with the highest number of foreign subsidiaries; owning 18 and 19 respectively in Africa.
Culled:Dailytimesnigeria
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