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Thursday, January 24, 2019 06:35 PM / by Emele Onu of Bloomberg
Key Insights:
Nigerian
authorities migrated banks to a new accounting standard known as IFRS 9 last
year to improve disclosure by forcing lenders to provide for existing losses as
well as those that might occur in the future. While the average
capital-adequacy ratio for the industry rose to 12.1 percent in June from 10.2
percent at the end of 2017, some banks said the transition shaved as much as
200 basis points off their capital bases.
Lenders
are struggling to contend with non-performing loans equal to 12.5 percent of
total credit. While these have improved from almost 15 percent in 2017, many
small- to medium-sized banks are battling to raise capital, leading to at least
one takeover deal; that of Diamond Bank Plc by Access Bank Plc.
The central bank plans to “apply a leverage ratio to
supplement existing capital ratios” for lenders as well as “additional
loss-absorbency requirements for domestic-systemically important banks,” it
said. “Country and cross-border risk guidelines are being developed for the
assessment of risks arising from across border operations of Nigerian banks,”
it said.
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