Central Bank of Nigeria has directed all Nigerian banks with foreign subsidiaries to submit within 60 days the recapitalisation plan on the anticipation of the regulatory capital increase under the Basel II and III and any other unforeseen increase from the host countries .
The apex regulator which stated this in its circular to all banks, signed by director Banking supervision, Mrs Agnes Martins on the recapitalisation of the foreign subsidiaries posted on its website said that under no circumstances are parent banks allowed to guarantee the deposit of their foreign subsidiaries.
The apex bank noted with concern the incessant demands on Nigerian banks by various host regulators for the recapitalisation of their foreign subsidiaries.
It said that this demand exerted enormous pressure on the capital base of most parent banks due to a lull in capital market making it difficult for them to raise capital, diminishing profit margin and increasing competition.
It said that the demands were not in tandem with the level/growth in business activities.
Henceforth, it said that the CBN shall not permit any financial outlay/outflow from parent banks to augment the capital needs of the foreign subsidiaries, but would rather encourage banks to take different options in raising capital for their foreign subsidiaries.
Some of the options suggested by the CBN are merger/acquisition with other local and or foreign banks in the host countries, sourcing fresh capital from the host country capital market either through private placement or public offering.
It further said that parent banks whose foreign subsidiaries were unable to raise additional capital in the host country market would be required to submit exit strategies from those jurisdictions not later than June 30, 2012.
Filed Under: Business News