Ensure minimum disruption of banking system in proposed recapitalization – CPPE

The Centre for Promotion of Private Enterprise (CPPE) has advised that the proposed recapitalization of banks should be done in a manner that will minimize shocks and disruptions to the banking system and the economy at large. In a statement, the CEO of CPPE, Dr Muda Yusuf, said the initiative would minimize disruptions and dislocations […]

The Centre for Promotion of Private Enterprise (CPPE) has advised that the proposed recapitalization of banks should be done in a manner that will minimize shocks and disruptions to the banking system and the economy at large.

In a statement, the CEO of CPPE, Dr Muda Yusuf, said the initiative would minimize disruptions and dislocations in the financial system.

Yusuf noted that with the current approach and timeline given by the CBN, the risk of banks collapse or hasty mergers and acquisitions should be minimized.

“It is also laudable that the current categorization of banks with differential capital requirements has been maintained – international, national and regional.  This is necessary to allow for inclusion and reduce the risk of dominance of the banking space by a few big banks.”

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It, however, said it is imperative for the CBN to assure depositors of the safety of their funds in the banking system, irrespective of the current level of capitalizations of banks.

“It is important to sustain the confidence of the banking public about the soundness and stability of the Nigerian banking system, especially because of the perception and vulnerable risks of smaller banks.

“We implore the CBN to ensure minimum risk to shareholders and employees in the banking system, across board. It is also imperative to guide against elevated concentration risks and the deepening of oligopolistic structure in the banking system.”

He added that there are also concerns around the large interest rate spreads in the Nigeria banking system between deposits and lending rates.

“Sometimes as high as 20%, which is one of the highest globally. The tenure of funds in the banking system is extremely short. Over 80% of funds are of one year tenure or less, which explains the high level of assets and liability tenure mismatch in the banking system.”